Freeing Mortgage Prisoners - Adviser Opportunities

I joke with my mortgage students that interest-only mortgages were readily available to anyone with a pulse in the late nineties and early noughties. A smidge cruel, but strictly speaking, quite correct. Furthermore, lenders weren't worried about the customers having a repayment vehicle either, so many people gorged themselves on cheap loans paying just interest for many years.

Once they became accustomed to the lower monthly payments, they feared converting to a repayment mortgage, even if they could afford to.

However, these loans did have a term. Typically 25 years, you only need to do the maths to realise that many of these are maturing.

That's where the potential problems lie with the lender. Getting their capital back once the term has expired and the customer is in their late 50s or early 60s. Thankfully there are some options to assist:

• Extend the term. This will not solve the problem; just defer it. But this might coincide with a pension pot becoming available.
• Retirement Interest Only (RIO) Mortgage. It could be used as a re-mortgage option. These interest-only mortgages would match the monthly payment they're used to. However, the capital never needs to be repaid until the borrower dies or sells the home. On a joint mortgage, they assess against the second income – be this salary or pension; this could cause an affordability challenge.
• Term Interest Only (TIO). These are the new name for interest-only mortgages because they have a set term. This is precisely what our mortgage prisoners have been in. However, the providers of these mortgages are much more willing nowadays to lend very late in life so long as ongoing income is available. So a re-mortgage to one of these firms is a must. Check out Livemore and Marsdon.
• Lifetime Mortgage. Re-mortgaging over to a lifetime mortgage would be an option if they don't want to make any interest payments and have this rolled up on the outstanding balance. They would need to fit age restrictions – usually above age 65 – and have plenty of equity as these loans mustn't exceed 25% loan to value.
• Using other capital such as a pension pot or savings. You may not be authorised to chat about this. Maybe another reason to become qualified in this area. It won't harm your future.
• Downsizing or releasing part security to sell some of their gardens. These may not be ideal solutions.

You never know, a mis-selling scandal may erupt, and they could claim against the adviser. The claims management companies, after all, are seeking their next victims.