To find out what type of mortgage you have, check your annual mortgage statement: it shows whether part, or all, of your mortgage is interest‐only.
How it works
With interest-only, your monthly mortgage payments only cover the interest charged on the loan and not the loan itself. At the end of the mortgage term, unless you’re making overpayments, you’ll still owe the original amount borrowed– it won’t have reduced – and it’s your responsibility to pay it back.
If you have an interest-only mortgage of £100,000 for 25 years, you'll pay the interest on the loan each month. But at the end of the 25 years, you'll still owe the full £100,000 (the 'capital').
If you’re not sure, call us on 0800 121 6353 and we’ll talk it over with you.
We no longer offer interest-only residential mortgages, but if you already have one, we want to make sure you have a repayment plan in place.
Repaying your interest‐only mortgage
If you have an interest‐only residential mortgage you need to ensure your repayment plan will cover the original amount you borrowed. Some options are:
Start a repayment plan
An endowment policy, a pension and investment plan are types of repayment vehicles which may help. This may help you save enough to pay off the capital in full but you should review it regularly to make sure it’s achieving the right amount of growth.
This will reduce the amount you owe. The terms of your mortgage will state if this is possible.
Change part of your mortgage to a repayment mortgage (subject to affordability)
This will help you reduce some of the capital, so you’ll owe less at the end of the term. You can still have the rest of your borrowing on an interest‐only mortgage.
Change all of your mortgage from interest‐only to a repayment mortgage (subject to affordability)
With a repayment mortgage, you’ll repay the capital as well as the interest.
Review your repayment plan
You’ll need to review your repayment plan regularly to make sure it’s on track and you’ll have enough to repay the loan at the end of the mortgage term.
You may find our self-assessment form useful. It'll help you identify whether there could be shortfall in your savings plan.
If you think there could be shortfall, or you would like to discuss alternative methods of repayment that we can support with, speak to our Interest-Only Team on 0800 121 6353. We can't give you investment advice, but we can talk through some options which could help you reduce how much you owe.
Shortfall in your repayment plan
If you think there could be a shortfall, speak to our Interest‐Only Team on 0800 121 6353. We can talk through any concerns you have and, where appropriate, book an appointment with a qualified mortgage advisor to recommend a solution.
No repayment plan in place
If you don’t have a repayment plan in place, it’s important to think about how you’ll pay off the loan at the end of the mortgage term.
You may have to think about selling your home to repay the balance. If the property is a buy to let investment, this may have been your intention when you took out the mortgage, but if it’s your home, property prices might not rise enough to allow you to buy somewhere else to live and still pay off the mortgage.
We’ll write to you from time to time to remind you to review your plans. We’re here to help and if you’re worried about how you’re going to repay the loan, call us on 0800 121 6353.
We can talk through any concerns you have and, where appropriate, book an appointment with a qualified mortgage advisor to recommend a solution.
Concerns about your interest‐only mortgage
It’s your responsibility to put a plan in place to make sure you can repay the balance at the end of the term. The original loan amount must be repaid, so you may have to think about selling the property, if no other plans are in place.
If you have any concerns, call us on 0800 121 6353. We can talk through any concerns you have and, where appropriate, book an appointment with a qualified mortgage advisor to recommend a solution.
Endowment policy linked to interest-only policy
If you have an endowment policy linked to your interest-only mortgage and have concerns about it, call us on 0800 121 6353 . We can't give investment advice but we can talk through any concerns you have and, where appropriate, book an appointment with a qualified mortgage advisor to recommend a solution.
Keeping in touch about your plans
Contact our Interest-only Services Team
We can support you and discuss any concerns you may have. If you have any questions about your interest-only mortgage or concerns about how you’ll pay off the capital, call our dedicated Interest-only Services Team on 0800 121 6353.