Switching to a repayment mortgage
The simplest move is to switch from interest-only to a capital repayment mortgage, where each payment covers both the interest and a slice of the loan. Your monthly cost goes up, because you are now clearing the capital as well as the interest. The pay-off is that nothing is left owing when the term ends.
If your current lender offers a product transfer, meaning you move to a new deal with the same lender, that is often the quickest way. A product transfer may not call for a full affordability assessment, which helps if your finances have shifted since you first took the mortgage out.
The other option is to remortgage to a new lender on a repayment basis. That means a full application and affordability check, but it opens up the whole market. A broker can pick out the most competitive deals and keep the switch running smoothly.
Extending your mortgage term
If moving to repayment would push the monthly payments out of reach, stretching the term is another option. A longer term brings the monthly cost down, though you end up paying more interest across the whole loan. Some lenders will run terms up to age 75 or even beyond.
Not every lender will agree to extend, especially if retirement is close. Where your current lender says no, a broker can track down others with more generous age and term rules, including mortgages for pensioners. For older borrowers, an equity release mortgage is another route worth weighing up.
What happens if you cannot repay at the end of the term?
Should the term end with the capital still owing, most lenders will try to work something out with you before going anywhere near enforcement. That might mean extending the term, moving you onto a repayment basis, or agreeing a plan to sell the property within a fair timeframe.
Repossession is the worst case, and lenders keep it as a last resort. Going through the cost and delay of repossessing and selling a property appeals to them far less than finding a way for you to clear the debt. The sooner you raise any trouble with your lender or a broker, the more room you have to sort it out.
If the end of your interest-only term worries you and the funds look short, get advice as soon as you can. Even with the end date years off, planning now can widen the options open to you later.