Mortgage

[Skint77]

I have an interest only mortgage; I have been told if I cant afford the monthly pmts, then I can hand the keys back. Is this so, and does anyone know what happens. It is an interest only mortgage which I've paid for 4 yrs - do the brokers have to freeze interest until the house is sold?

[WoWo]

I'll assume you're in the UK.

Who told you that you can hand the keys back? Thats not the case, or at least you can't just give the keys back and wash your hands of the situation. Given you had the property for 4 years I would imagine there has been enough of a buffer for the lender to get their money back, but if they don't they will come to you for any shortfall.

The fact it's interest only is neither here nor there, in fact only relevant in regard to the fact you have paid not a single penny from the debt and therefore are still currently liable for the full mortgage amount.

You basically need to contact the mortgage company and see what they say, but I can't imagine they will allow you to stop paying the interest until the property has been sold.

[themas]

You can hand back the keys, but make sure you tell the mortgage lender in writing (& keep a copy) what you are doing, and get a receipt.

But they will go on adding interest until the house is sold. They will also add various other costs for security, solicitors, agents etc. & the house is likely to be sold for less than if you sold it yourself.

Once they had sold, they would deduct all the outstanding mortgage interest and capital and all their other costs from the amount it sold for and - if there was anything over - send it to you. If the total costs exceeded the amount it sold for, they would come after you for that shortfall amount.