Int Only Mortgage - what happens at end of term

2ndchance

I would be very grateful if anyone could tell me what the usual situation is when a period of interest only repayments on a mortgage is up. We have just been offered a third year of interest only payments-due to financial difficulties. This time however, the letter we received stated that at the end of this alternative arrangement term our repayments will be rescheduled to ensure the loan clears by the existing expiry date of 2023. Am I right in thinking therefore that this means that when the 12 months is up we will actually be faced with higher payments as the three years of capital not paid will be added on to the normal capital plus interest payment each month. Up until now we thought the outstanding payments would be added on at the end therefore extending the mortgage.
Many thanks for any replies.

nohow

The term of the mortgage does not change you will be making payments to the principal over a shorter term. Apply to the lender to extend the term.

Paraic OMuir

Yes you are correct, the term will remain the same. You should discuss with the lender with regards to extending the term.

2ndchance

Thank you Paraic and nohow for your replies. I would hope to be in a position to resume normal payments in a year but will not be able to pay extra to cover the 3 years interest only so will apply to extend the term. I suppose we should do this now and not wait to the end of the interest only year?

nohow

yes talk now and enquire how much your repayments will be.Be prepared is the best option