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Existing Interest Only Mortgages

Your home may be repossessed if you do not keep up repayments on your mortgage

Important Information for customers with Interest Only Mortgages

With an Interest Only Mortgage, repayments cover the interest element of your loan and not any of the outstanding loan (capital). The actual amount of capital borrowed must be repaid in full at the end of the agreed term of the mortgage.

It is therefore vital that there is a realistic repayment plan in place. The closer a mortgage is due to end the more important it is that you review your plan of repayment and take whatever action is necessary to address any potential shortfall. It is also recommended that you continue to review your repayment plan on a regular basis.

This review may include obtaining up to date values of any investments and savings plans you may have in connection with your mortgage and obtaining a current value of the property if a sale of the same is your proposed route to repayment.

For more information please visit the Money Helper at https://www.moneyhelper.org.uk/en/homes/buying-a-home/ways-of-repaying-an-interest-only-mortgage External link icon

FAQs

  • This is a mortgage where your monthly repayments only cover the interest on the loan and you are not paying back any of the capital borrowed unless you have elected to make overpayments.

    It is therefore very important that you have a repayment plan in place to repay the capital at the maturity of the loan. This could be an investments and savings plan, overpayments, personal savings or other liquid assets.

    If at maturity, there is a shortfall in your investments and savings plan, you will still be liable to repay any amount of capital outstanding.

  • It is important to review your Interest Only Mortgage repayment plan at least annually to ensure that it is on track to repay your loan on or before its maturity date.

    In the case of investments and savings plans, you should regularly review the payment projections for the policy which are generally posted out to you annually by your policy provider. You can however contact them at any time to obtain up to date figures.

  • If you do not have a repayment plan in place you should act now, even if the maturity date of your mortgage is still many years away.

    The longer you delay addressing the matter, the fewer options you may have to put a suitable plan in place.

  • Your options will depend on your personal circumstances and these may include:

    • Transferring some or all of your mortgage on to a Capital & Interest Mortgage (this would be subject to our usual credit assessment and current Terms & Conditions).
    • Introducing lump sums such as personal savings to reduce the balance of your mortgage, for example to bring the balance into line with any investments and savings plan projections.
    • Making regular monthly overpayments. Any amount paid in addition to that required to cover the interest, will go towards reducing the capital amount outstanding.
    • Considering a sale of your property or downsizing to a property of a lesser value.

  • Upon maturity of your existing Interest Only Mortgage, you will not be able to extend the term however you may wish to apply for a new replacement loan with a repayment structure designed to meet your individual circumstances.

  • You can find out what your monthly repayments would be on a Capital and Interest Repayment Loan by visiting our Mortgage Calculator.

  • If you decide to switch some or all of your Interest Only Mortgage on to a Capital & Interest Repayment Mortgage, you should contact us on 0800 389 0833.

Whether we provide credit depends upon your circumstances, and you must be 18 or over. Lending criteria, terms and conditions apply. Your home is security for your mortgage. You may need to provide other security. An early repayment charge may apply. A Danske Bank personal current account will be required to service the mortgage. You can get details of fees, service charges, interest rates and terms and conditions that may apply to Danske Bank personal current accounts throughout this website and from all our branches in the UK.

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