Interest only mortgages

What is an interest only mortgage?

With an interest only mortgage, your monthly mortgage payments only cover the interest you owe. This means, over time, the amount borrowed (the capital) does not reduce and will need to be repaid in full at the end of the mortgage term.

For example: If you have an interest only mortgage of £100,000 for 25 years, you will pay the interest on the loan each month. But at the end of the 25 years, you will still owe the full £100,000.

If you have an interest only mortgage or a mortgage that includes an amount borrowed on interest only terms, it’s important to check regularly that your repayment plan is on track to repay the mortgage at the end of the term.

Let us know about your plan

You can update us with your repayment plans by completing our interest only assessment form.

How we've helped others

Mr Yates had reached the end of his mortgage term on his interest only mortgage and no longer had a repayment plan in place to cover the outstanding balance. After contacting us to discuss his options, an income and expenditure assessment was carried out which showed that he would be able to afford monthly overpayments and clear his balance in 2 years. Mr Yates therefore remained on the interest only product he was already on and an arrangement was set up to collect overpayments by Direct Debit each month. This meant that the arrangement was affordable for Mr Yates and the mortgage was on track to be fully repaid 2 years later.

Mr and Mrs Davies had 9 years left on their interest only mortgage when they realised their endowment policy would not repay the remaining balance at the end of the mortgage term. They made an appointment to speak with a mortgage adviser about their options to repay the shortfall and an affordability assessment was carried out. It showed they could afford to change their mortgage to a capital and interest repayment method. This meant that their mortgage would be repaid in full at the end of the term. Mr and Mrs Davies decided to change their mortgage as recommended and kept their endowment policy.

Mrs Smith had reached the end of her interest only mortgage term and although she had enough funds to make a capital repayment to reduce the outstanding balance, she didn’t have the full amount required. After contacting us, an affordability assessment was carried out which found that if she were to reduce her balance with a capital repayment, she could afford to convert the remaining mortgage balance to a capital and interest repayment method, over an extended mortgage term. This meant that when she is ready to retire, providing her monthly repayments are maintained, her mortgage balance will be repaid in full.

It's not too late to contact us

If you are nearing the end of your mortgage term or have reached the end of your mortgage term and have no repayment plan in place, it's not too late to contact us to discuss your situation. We'll help find a solution that's right for you.