Interest-only mortgage problems

Over the last few months mortgage lenders have tighten up their lending criteria and many interest-only mortgages are now only available up to 75% loan-to-value (ltv). Mortgages above 75% ltv are likely to only be available on a full capital repayment basis, although there are lenders who will still lend up to 85% interest-only. This is providing borrowers state their mortgage repayment plans such as: ISA's, monthly overpayments, annual bonuses or sale of the property. Some existing borrowers have been switching from repayment to interest-only mortgages to cope with problems like unemployment. Aaron Strutt, a broker at Trinity Financial Group, says: "Many borrowers who took high loan-to-value mortgages are likely to be on interest-only. At a time when many fixed rate mortgage deals have come to an end millions of homeowners are paying low standard variable rates or tracker rate deals." "Now is the time, for those who are able, to be repaying some of your mortgage as the Bank of England base rate will not stay at 0.5% for ever - monthly payments will increase." "Most mortgages allow up to 10% of the capital balance to be repaid each year, or a portion to the loan to be put on full repayment. Many of our clients have taken out a mortgage where 25 or 50% of the loan is on interest-only and the remainder on repayment. There is normally an administration charge of around £25 to make a change like this with your current mortgage lender." 21st August 2009