My mortgage balance never reduces, even though I make all my payments

Q I have mortgage which was originally taken out with an endowment policy. I cashed in the endowment some years ago and never informed my building society. I am still paying the mortgage payment every month and everything is up to date.

Every year, I get a statement from my building society and the balance on my mortgage is about £22,000. This figure never seems to go down. My house was ex-council when I put in to buy it, which is why I got it so cheap. At the end of the mortgage term when I reach 65 (in seven years’ time), will I just have to pay the building society £22,000? SN

A The reason that the figure on your yearly statement never goes down is that you have an interest-only mortgage. So you don’t pay back any of the mortgage debt – only interest every month. The endowment that you cashed in was supposed to have been used to pay off your mortgage at the end of its term.

As you no longer have the policy, yes, you will need to find £20,000 to pay your building society when your mortgage comes to an end. Although it will mean that your monthly mortgage payments go up, you might want to consider changing to a repayment mortgage to ensure that every month, part of your mortgage payment will go towards paying off the £22,000 you owe.

Virginia Wallis

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