Why Are Interest Only Mortgages Causing Trouble For Homeowners?
Citizen’s Advice Bureau have warned that nearly a million UK homeowners are soon to face a harsh reality when their interest only mortgages come to an end and they have no way to pay off the capital of their mortgage.
What is an interest-only mortgage?
Interest only mortgages allow the homeowner to just pay the interest on their mortgage loan monthly. This means they do not contribute towards reducing the actual debt. A bit like making the minimum payment on a credit card that just covers the interest. The idea is that at the end of the mortgage term the homeowner will repay the loan amount from another savings source. It’s true that this comes with the benefit of a cheaper monthly expense. But it’s the burden of trying to find significant funds at the end of the mortgage term.
The scary reality is that for almost 1 million UK homeowners who don’t have a plan for the end of their mortgage term is that they could face having to sell their home to repay the debt. Or worse have it repossessed if funding is not available.
New rules for interest only mortgages
The term ‘kerb appeal’ is a real consideration for a lot of buyers. Your home may be beautifully decked out inside, but first impressions count and the exterior of your property could make or break a deal with your potential buyer. Windows can make a big difference. Old, outdated double glazing or cracked plastics can make or break the look of the exterior of your property. Choosing something that compliments the look of the house, be it modern or traditional, and ensuring they are well maintained will give a great first impression.
Style note: Grey fascias are a big trend right now on modern style homes and add additional character and interest to the exterior look of a property.
Flooring
You’ll be amazed at how a new floor can enhance the look of a living space. An old, worn carpet isn’t going to be desirable to potential buyers. Modern laminate or wood flooring is still very trendy and desirable, but if the budget doesn’t quite stretch this far a good quality plain/light coloured carpet will also help develop the look of a room.
Loft conversions
This is considered to be the most valuable home improvement project, purely for the vast amount of additional living space a loft conversion creates. Additional rooms typically equals additional purchase price. In 2014 Nationwide Building Society released stats that a loft conversion can increase the value of your property by up to 21%. Extending into the basement or over a garage would also have a similar effect.
Kitchens
More than ever the kitchen is a real focal point for potential buyers. A nice looking kitchen with enough worktop space is one of the key considerations for a lot of buyers. It doesn’t need to break the bank either! A simple change of unit doors and a good lick of paint could help too. A good kitchen can add around 5% to your overall property value.
Garden
A well-kept garden with various functions is a real selling point for potential buyers. Ensuring the lawn is maintained and the borders are planted with all year flowers is a great start. Consider decking, landscaping or a patio area for your outside space showing a clear place for outside entertaining. Showcasing how the space can be used to potential buyers will get them dreaming of long summer evenings sipping Pimms with their friends in the garden.
These emotional connections and visualisations are what sells houses.
With mortgage interest rates so low, there’s never been a better time to remortgage for home improvements. You may even be able to take a lump sum to fund your home improvements without increasing your monthly payments.
Our friendly personal advisers are on hand to support you to find the best mortgage deal for your circumstance, so you can get the most out of your mortgage and your home. Contact us.
See our guest blog about interior design to sell your home from Chloe Bullock from Materialise.
Kind Regards
The rules on interest only changed three years ago. Lenders are now expected to insist you have a strategy in place to develop a large enough lump sum to repay the mortgage loan. And we think this is a good idea considering the current state of the interest-only mortgage boom. More on that below.
The peak of the interest only mortgage boom was in the 1990’s meaning that these mortgage terms will be reaching their maturing peak period in 2017. The BBC have reported that banks and building societies have been told by regulators that they must write to their customers. The letters should warn of financial danger and offer solutions or advice.
A solution to the interest only mortgages problem
There is a light at the end of the tunnel for homeowners on interest-only mortgages. With interest rates so low you could potentially switch to a repayment mortgage for a fractionally higher monthly outlay.
If you’re on an interest-only mortgage and would like to talk about your options then contact our independent experts who can advise you further.
It costs less than you may think to obtain professional advice that could save you £1000’s
Contact Us on 01273 736536 or email us info@numberonemortgages.co.uk and discover how our expert advice can help you reach your goal, save you time and £££’s.