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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, your repayments cover only the interest on your loan, not the amount you borrowed (the capital). This means you must pay back the full capital amount at the end of the mortgage term.

It’s important to have a clear plan for repaying the capital. As your mortgage term gets closer to the end, it becomes even more important to review your repayment plan and take action if there’s a risk of not being able to repay the full amount. It’s a good idea to check your plan regularly to make sure it’s on track.

When reviewing your plan, you might want to check the current value of any savings or investments linked to your mortgage. If selling your property is part of your repayment plan, it can be helpful to get an up-to-date valuation of your home.

For more guidance, visit MoneyHelper for useful information.

FAQs

  • An interest-only mortgage means your monthly payments only cover the interest on your loan. You are not paying back the amount you borrowed (the capital) unless you choose to make extra payments.

    It’s important to have a clear plan to repay the capital by the end of the mortgage term. This plan could include savings, investments, overpayments, or other assets that can accessed.

    If your plan does not cover the full amount by the end of the term, you will still need to repay any remaining capital.

  • Even if you already have a repayment plan, it’s important to review it regularly to make sure it’s on track to repay your loan by the end of the mortgage term.

    If your plan includes investments or savings, check the payment projections regularly. Your policy provider usually sends these updates each year, but you can contact them at any time to get the most 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 years away.

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

  • If your repayment plan is not enough to cover your mortgage, there are options to consider based on your circumstances:

    • Switch some or all of your mortgage to a capital and interest repayment mortgage (this will depend on our standard credit assessment and current terms and conditions).
    • Use lump sums, such as personal savings, to reduce your mortgage balance. For example, this can help align your balance with the projections of your savings or investment plan.
    • Make regular overpayments. Any extra payments beyond the interest will reduce the amount you still owe on the capital.
    • Sell your property or consider downsizing to a smaller or less expensive home.

  • You won’t be able to extend the term of your existing interest-only mortgage when it ends. However, you can apply for a new loan with a repayment structure that suits your personal circumstances.

  • You can use our Mortgage Calculator to see what your monthly payments would be if you switch some or all of your interest-only mortgage to a capital and interest repayment plan.

  • If you decide to change some or all of your interest-only mortgage to a capital and interest repayment plan, please call us on 0800 389 0833.

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

Whether we provide credit depends on your circumstances, and you must be 18 or over.

Applications are subject to status and lending criteria. Your home is security for your mortgage, other security may be requested.

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