Repaying my interest only mortgage

With an interest only mortgage, your monthly payments only cover the interest charged on your mortgage. That's why it’s really important to have a repayment strategy in place, so you can repay the original amount borrowed at the end of the mortgage term.

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What does an interest only mortgage mean for me

When your mortgage term ends, you’ll still need to repay the original amount borrowed (called ‘the capital’) plus any fees that may have been added over the term of the mortgage.

This is often done through an investment such as an endowment, ISA, or pension. However, if your investment doesn’t perform as well as expected, you’ll still need to repay the capital at the end of the mortgage term.

If your repayment strategy isn’t on track to pay back all of the capital, it’s important to act now. If you’re in this position, you may wish to consider:

  • Converting all or part of your interest only mortgage to repayment.
  • Making overpayments to reduce the capital balance.

Some amendments may have an administration fee. Please see our Tariff of Mortgage Charges for further details.

If you do have a repayment strategy in place, it’s really important that as well as keeping track of its performance, you also keep us informed about it. Put simply, the more we know the more we can help you. If you’ve changed your strategy, please call us on 0800 169 9712*.

Throughout the lifetime of your mortgage, we’ll write to you at regular intervals to remind you that the capital on your mortgage needs to be repaid at the end of the term.

If you haven’t got a strategy in place, then we recommend that you get independent financial advice. This will help you understand all the options that could be available to you. Unfortunately, we can’t offer you advice regarding your repayment strategy.

If you’re experiencing financial difficulties or concerned about any other aspect of your mortgage, don’t panic. Please give us a call at the earliest opportunity. You can also see our Money Worries section for further support.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Converting my interest only mortgage to repayment

A repayment mortgage will gradually reduce the balance of your loan, as well as paying the interest on the loan. As long as you stay on track with your monthly payments, your mortgage will be completely paid-off at the end of the term.

Switching to a repayment mortgage will increase your monthly payments so it’s important that you can still afford to maintain them. To help keep your payments affordable, you may also wish to consider extending your mortgage term when you switch. Please remember that you’ll pay more interest over the term of the mortgage if you do this.

Our repayment calculator will show you how much you could be paying each month if you converted to a repayment mortgage.


Convert to repayment Calculator


YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Making overpayments to reduce the capital balance

Making regular or lump sum overpayments is another way you could help to reduce the amount you’ll owe at the end of your mortgage term. You might be surprised how much of a difference it can make.

You should not overpay more than you can afford. If you have other outstanding debts, like credit cards or personal loans, consider if it would be better paying these off first – especially if the interest rate you are being charged on them is higher than that applying to your mortgage. If you have any queries, we recommend you speak to an independent financial adviser.

Our overpayment calculator will show you how much you could benefit from paying extra each month. For more information or to make an overpayment, check out our dedicated overpayments page.


Overpayment Calculator


YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Update your interest only repayment strategy details

If you’ve changed your repayment strategy, or haven’t told us how you plan to repay the original amount you borrowed at the end of your mortgage term, please call us on 0800 169 9712*.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Frequently Asked Questions

  • What is an interest only mortgage?

    An interest only mortgage is where you only pay the interest owed on your mortgage every month. You’ll then need to pay back the amount you initially borrowed at the end of the mortgage term. It’s up to you to make sure you can repay the capital at the end of the mortgage term.

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  • What is the difference between a repayment mortgage and an interest only mortgage?

    With a repayment mortgage, you pay towards the outstanding capital balance every month, as well as the interest owed. This means that you’re guaranteed to pay off your mortgage in full at the end of the term, as long as all of the monthly payments have been made in full and on time.

    An interest only mortgage is where you only pay the interest owed on your mortgage every month, and then pay back the amount you initially borrowed at the end of the mortgage term.

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  • How do I find out if my mortgage is interest only?

    You can check your annual mortgage statement or mortgage offer to find out if all or part of your mortgage is interest only. You can also visit your customer hub online or if you prefer call us to discuss your options on 0800 169 9712*.

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  • What should I do to ensure the capital balance will be repaid at the end of the term?

    It’s important to keep an eye on your repayment strategy to make sure it’s performing as expected. We'll write to you at regular intervals to remind you that the capital needs to be repaid at the end of the term, but it’s up to you to ensure there’s an adequate strategy in place.

    If you’re worried that your repayment strategy is not enough to repay the capital, call us as soon as possible on 0800 169 9712* so we can look at your options.

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  • I’m worried there will be a shortfall at the end of the term, what should I do?

    Take action. If you’re worried that your repayment strategy is not enough to repay the capital, call us as soon as possible on 0800 169 9712* so we can look at your options.

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  • My repayment strategy has changed, is there anything I need to do?

    If you’ve changed your repayment strategy, please call us on 0800 169 9712*

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  • Can I change my mortgage from interest only to repayment?

    Yes. If your mortgage is currently interest only you can change it to repayment. You can do this for all or part of your interest only balance, but we will have to check it’s affordable for you first.

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  • I have an interest only mortgage, but no repayment strategy, what should I do?

    Call us right away on 0800 169 9712* to discuss what options are available to you. These may be things like making additional overpayments, or switching some or all of the mortgage to repayment.

    Please remember that we’re unable to provide any advice about your repayment strategy, so you may wish to also seek independent financial advice.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE