The newly-styled Financial Conduct Authority has been sounding an alarm that others have been sounding for a long time: interest only mortgages may be leading folks down a pretty bad road. It’s not necessarily the problem of the mortgage, but really in consumer education. The truth is that the way interest only mortgages work isn’t a new thing. Many consumers are claiming that they weren’t fully educated on the loans, being told that they could have one of these mortgages to finally get into their dream home. Unfortunately, the FCA has estimated that close to three hundred thousand people have no real idea of how to repay their loan.
We’re skeptical because you get statements every month showing whether or not you’ll have enough left in an endowment policy to really pay the mortgage loan off and get a surplus check for your trouble.
There’s nothing wrong with knowing how much you can bite off in terms of mortgages. If anything, this is something that you absolutely must know. You can’t blame the mortgage product just because things change in your life. In fact, every single mortgage guide that we’ve ever published states this loud and clear — you must ensure that you’re getting your bills paid even if the market turns on you. This would be the same way if you lost your job. The electric company isn’t necessarily going to have mercy on you. They will still expect to get their money from you every single month, because they’re going to be providing you with electricity. You have to think about things like this as much as you can, otherwise…who will?
Running to the FCA because something has changed in your life isn’t going to be a good thing. For one, this is a new problem and the Authority is already slammed with calls about it. They’re going to investigate how these mortgages were sold, but we’re not so sure that the percentage of mis-selling will be as high as some are thinking it will be.
If this isn’t the type of loan that you can handle, you definitely don’t want to do it. You absolutely want to make sure that you’re looking into getting things taken care of now, while it’s on your mind. Look at your own mortgage. Figure out when you’re going to be paying it off. If you can’t figure that out on your own, you can get help with this. In addition, if you don’t know what you’re going to do with the loan, then you need to reach out to your mortgage lender sooner than later.
Part of the problem is that a lot of consumers aren’t keeping on top of information like this. So when they come to the end of their loan and they have a lot of money due, they’re running to the mis-selling card. You can’t claim that you didn’t know it was only going to be interest only payments. You must realize that you have to take responsibility. If your income has dropped, you need to figure out ways to still make your mortgage work. Everyone has to realize that nothing is secure, and make a backup plan just in case.
No, this isn’t a guide meant to uplift you, and we apologize for being harsh. But this is your family’s future on the line and it means that you have to take responsibility for it, not the government. That’s really all there is to it. Good luck!