At the end of an interest only mortgage I understand that you owe the balance of the mortgage i.e. the loan amount as you do not pay off the capital. If at the end of the interest only mortgage you have equity in the property, can you re-mortgage at this time? If so is there a threshold where the loan to value amount is taken into consideration i.e. if you have good equity in the property (say 40% equity against the outstanding loan amount) is applying for a re-mortgage to a repayment mortgage an option/viable or is it simply the mortgage lender wants the loan amount paid off - so any equity is only useful if you sell the house to re-pay the debt at the end of the interest only mortgage term?
Any help/information would be greatly appreciated.
You are correct in your statement as to how interest only works at the end of the mortgage term. Also you are certainly able to look at remortgaging to another lender, and subject to the prevailing criteria, you could look to do this on an interest only basis again, or another method of repayment if appropriate.
Lenders have a variety of views on what they will / won't accept as a repayment vehicle for interest only mortgages. If you don't have a suitable reyment strategy, and want to use the equity in the property to downsize, then you would need to be looking at the lower loan to values, circa 60% (ish).
As John Charcol is an Idependent, Whole of Market Broker we have access to those lenders who still take a sympathetic view on interest only mortgages.
If you want to discuss your enquiry in more detail, then please let me know and I'll arrange a convenient time for you to speak to one of our consultants.
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