In an increasing interest rate environment, coming off a low interest rate PLUS coming to the end of an ‘Interest Only’ term, can be financially traumatic!
Be proactive and explore your options.
With a Mortgage of $500,000 on an interest rate of 2.99%, if you refix at say 6.50%, your interest payments will more than double!
Then if your Mortgage switches to ‘Principal and Interest’ your repayments will leap up again!
So, explore options available to you, as your ‘Interest Only’ term approaches its expiration date, so you can make an informed decision about your options to ensure a smooth transition.
SOME OPTIONS TO CONSIDER…
Request an ‘Interest Only’ extension from your existing Lender
Your current Lender may consider the possibility of extending your ‘Interest Only’ Mortgage term.
By extending the term, you can gain more time to repay your Mortgage and at the same time maintain the lower monthly Mortgage payments associated with an ‘Interest Only’ Mortgage.
Your Lender will evaluate your current financial situation, to assess your ability to repay the Mortgage over an extended period.
With lending policies becoming more conservative, there is no guarantee your request for an ‘Interest Only’ Mortgage extension will be approved.
So, talk to us at iLender, as we have up to date information to help determine your best course of action.
Refinance Your Mortgage to Another ‘Interest Only’ Lender
If your current Lender is unwilling to extend your ‘Interest Only’ term, another option may be to Refinance to a different Lender.
Refinancing, if possible, may enable you to continue making ‘Interest Only’ repayments for another predetermined period, typically around two – five years.
This would help you keep your costs low and maintain favourable cash flow.
Each Lender has its own policies and criteria for approving ‘Interest Only’ Mortgages, so if your current Lender can’t approve an extension, that doesn’t mean another Lender won’t.
Again, by talking to iLender, we can help you navigate the various options and find the right Lender for your specific situation.
Transition to a ‘Principal and Interest’ Loan
If an extension or refinancing to another ‘Interest Only’ Mortgage is not possible, you will likely be transitioned to a ‘Principal and Interest’ Mortgage when your ‘Interest Only’ term ends.
Then you would start repaying both the principal and interest portions of your Mortgage.
This option would result in higher monthly Mortgage payments, but it can be a viable solution if you have adequate cash flow to cover the increased repayments.
To help you assess your overall financial situation, talk to iLender so you can get advice to ensure that transitioning to a principal and interest Mortgage aligns with your long-term financial goals.
To establish if an ‘Interest Only’ extension is possible, or whether you need to consider Refinancing, or transitioning to a ‘Principal and Interest’ Mortgage, contact iLender. We can offer professional friendly Mortgage Advice, assisting you to make informed decisions aligning with your financial goals.