Interest-only mortgages were endemic in Spain before the financial crisis. They were often pushed as a much more affordable and attractive alternative to taking out a standard repayment mortgage.
This approach has meant that millions of property owners now find themselves approaching the end of their interest-only term.
If you have an interest-only mortgage or are worried about increasing payments, read on to find out more about your options.
Interest-only mortgages were sold as a cheaper alternative to traditional borrowing that would allow buyers to get a better deal. Many of them were sold with promises of massive profits or guaranteed rental incomes. These promises never materialised, and instead, buyers were left with massive increases in their monthly repayments, amongst other issues.
Although most of these mortgages were taken out over a decade ago, and many of the lenders and banks are now gone, you, as the borrower, are still trapped. However, there are solutions.
What happens at the end of your interest-only term?
Usually, these mortgages are given with 10-15 years of interest-only payments; at the end of this term, the mortgage will change to capital repayments. This can see your repayments increase by a huge amount. We have seen payments increase tenfold, for example, €300 per month to over €3,000 per month.
There is no way to halt or reverse this change, and you will be required to make your monthly payments. Failure to do so will result in recovery action from your lender.
How much will my payments increase?
Your original interest-only mortgage agreement will tell you whether this is a fixed or variable mortgage, and this will impact the amount that you pay. The total amount to repay and the length of payment term will allow you to know what your repayments will be and, how long you will have to repay.
Many of these mortgages were taken long ago, properties have since been abandoned, and the lenders either don’t exist or are very difficult to deal with. This means that many aren’t actually aware of what they owe. This makes it all the more surprising when threatening letters begin to arrive.
Can I avoid paying an interest-only mortgage?
Unfortunately, not. You are liable for the mortgage value, and despite what you may have been told, you cannot abandon your property.
You can sell your property and use the proceeds to pay your mortgage. However, many properties with interest-only mortgages are likely to have fallen into negative equity. This is common for properties in Spain, especially in areas popular with second homeowners.
Negative equity brings its own complications, you can read about Negative Equity in more detail here.
If you do not keep up with repayments, you will face recovery action similar to any other debt. This will be both in Spain and in the UK.
What are the options?
When it comes to property debt issues, it can, at times, make you feel hopeless however, there are always options. EU Property Solutions specialise in assisting borrowers with interest-only mortgages.
The sooner you act, the better the outcome will be. Our team is always available to review your case and offer solutions.
We ensure you get the best outcome, and just as importantly, we strive to bring hope and support to anyone struggling with property debt. You can call us on 0330 124 1230 or email [email protected].
Was my mortgage mis-sold?
If you bought before the crash, you were likely told about ‘guaranteed rental yields’ or ‘imminent boom in prices’. Whilst this may have been true for some, it wasn’t for most. Realistically, most of these mortgages were ‘mis-sold’. Unfortunately, this reason is useless with lenders. The best approach is to be realistic that you will not be able to escape a mortgage because it was mis-sold.
What happens if I leave the property?
In the past, many people have been advised that simply leaving their property and returning to the UK will erase their responsibility and end their nightmare. This is not the case and can have serious consequences for the homeowner. Failure to pay the mortgage is treated as a default so, your lender will begin action to recover their money.
Why Should I Trust EU Property Solutions?
For over a decade, we have been helping people in exactly the same situation you find yourself in. We understand that you have probably been lied to by the bank, developers and estate agents. If our amazing results don’t say enough for themselves, check out some of our testimonials or, call our office and speak to a member of the team. You can even chat with previous clients of ours over the phone!
Why not get in contact?
Like we said, the best way to hear how we can help is to contact us today.
All of our initial calls are confidential and completely obligation-free. So, if you don’t like what you hear, you don’t have to go any further.
If you want a solution to your property debt issue, click the button to talk to us.