New measures agreed by banks and building societies to help homeowners with their mortgage payments could be a financial risk as they face a higher total interest bill but a lower income in retirement.
Lenders have been encouraged by Chancellor Jeremy Hunt to offer more flexibility to homeowners through a new ‘Mortgage Charter’ to support and reassure them through these difficult times. Under the new Charter, lenders have agreed several measures, including extending borrowers’ mortgage terms. This would reduce monthly payments, with the option to go back to their original term within six months, or switch to interest only payments for six months.
These new options are available to you if you are up to date with your payments without needing a new affordability check and it won’t affect your credit score.
On a capital repayment mortgage, the shorter the mortgage term, the bigger your monthly payments will be. By extending and having a longer term, you may benefit from a lower monthly payment, but you’ll also pay more interest to the lender over the term. Extending a typical £200,000 mortgage from 25 to 35 years would cost more than £92,000 in interest, assuming 6% interest over the life of the loan.
If you are having difficulty with your mortgage payments, you should talk to us sooner rather than later. There are always implications to changes to the terms of a mortgage – we’re here to help and give you the expert advice you need and explain your options.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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