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Interest-only Mortgages: Your Questions Answered…

4 December 20224 min readby Tom Miskelly

Cyprus Interest-only Mortgages Other Countries Property Debt Spain

Interest-only mortgages are one of the most common issues for property owners across Europe, especially for those who bought pre-2008. These mortgages were billed as a cheap and easy alternative to a traditional mortgage. However, the reality turned out to be very different.

We always advise clients to “arm themselves with knowledge” so, in this article, we have asked the EU Property Solutions team to answer your questions about interest-only mortgages.

“Was my interest-only mortgage mis-sold?” – Jill, Birmingham

The first question we get from most new enquiries is surrounding the idea that their mortgage was mis-sold, especially for interest-only mortgages. 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. This is due to a combination of factors, including the difficulty of proving mis-selling and the fact that most developers/lenders have since disappeared or been bought over. 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?” – Steve and Ruth, West Midlands

In the past, many people with interest-only mortgages 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. Read the next question to find out what this recovery action might look like…

“Can I be pursued in the UK?” – Rob, Stirling

In short, yes. Lenders have the ability to operate across jurisdictions and can therefore come after you in your home country. Banks are still relatively civil in most instances, provided that you engage in some form, but their patience is wearing thin.

European lenders are painfully slow, so it may be several years before you hear anything, this can make that first letter quite a surprise! If you ignore your lender, they may use the following to recover money:

  • Applying for European Enforcement Orders
  • Appointing strong legal firms to chase you in the UK
  • Making their own enquiries as to the people’s worth/assets
  • Most worryingly for our clients, the sale of loans to Vulture Funds

“What are my options if I can’t pay my interest-only mortgage?” – Martin, London

Although these answers may seem to be all doom and gloom, the good news is that there are always options available. Without going into too much technical detail, there are a few pieces of advice that apply to any property debt situation:

  • Action – Burying your head in the sand or being unrealistic helps no one – especially you. To be able to solve your problem, you need to accept it. You need to know precisely what your current situation is and every aspect of it, and say to yourself: “Hi, my name is XXX, and my house in Spain is in negative equity.” This is the first step to sorting your issues once and for all.
  • Communication – As we said previously, Banks do have some patience, but this can run out quickly. This can be made worse by a lack of communication. It also means that when they do come after you, there could be a few nasty surprises in the form of additional costs, interest and potential legal action. Talking to them with the right representation can make all the difference.
  • Expert advice – If you are feeling overwhelmed by trying to deal with these issues, you are certainly not alone. This is where EU Property Solutions come in. We can break down your issues and provide you with real and realistic solutions. Whether this is through surrendering your property or negotiating with your lender, the best advice can change your outlook and your position.

“Why EU Property Solutions?” – Every enquiry

Over the past decade, we have helped homeowners across Europe. During this time, we have developed knowledge, experience and working relationships with major lenders.

This allows us to review each and every case individually, offer real solutions and then act on your behalf to enact these solutions.

If you are struggling with an interest-only mortgage or any form of foreign property debt, do not hesitate to get in touch with our team for a free, obligation-free call. We are always happy to help. You can call us on 0330 124 1230 or email [email protected].

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