Your interest only mortgage

With an interest only mortgage, your monthly payment pays for the interest charged on the amount you borrowed from us. You still owe the balance, or capital, when your mortgage comes to an end.

You need to make sure you can repay your mortgage at the end of the term plus any fees to be paid to close your account. This is usually paid using an investment plan. Read our repayment strategy page for details.

All borrowers named on the mortgage are jointly responsible for making sure the mortgage can be paid in full at the end of the term.

The other main type of mortgage is capital and interest (repayment). This is where some of the monthly payment pays for the interest charged with the rest used to pay back the capital. As long the payments are made on time, the mortgage is paid off at the end of the term.

When your current deal ends, you can take out another interest only deal, or switch to a repayment mortgage. This is subject to meeting our lending criteria.

A repayment strategy can be an investment such as an endowment, ISA or pension which will be used to pay off your mortgage when it ends. It’s important to keep track of how your repayment strategy is performing as you’ll still need to repay the full amount if your investments don’t cover what you owe.

We’re unable to make recommendations about your repayment strategy. We suggest getting in touch with someone who can help if you don’t have a plan in place or to check how your repayment strategy is doing. You could:

• Visit moneyhelper.org.uk or call them on 0800 138 7777 for free and impartial money guidance
• Speak with an independent financial adviser – there may be a charge for this.

Call us on 0800 169 9712* to let us know of any changes to your repayment strategy or if you haven’t told us how you plan to pay off your mortgage.
 

What to do if your repayment strategy isn’t on track

It’s important to act now if your repayment strategy is not performing as expected. You may want to think about:

• Changing all or part of your interest only mortgage on to a repayment basis. We may charge an administration fee for this – see our Tariff of Mortgage Charges for details
• Making overpayments to reduce your mortgage balance
• Calling us on 0800 169 9712* so we can talk through your options.

* Calls are recorded for training and monitoring purposes. Lines are open 9am–5pm Monday to Friday. We’re closed on Bank Holidays.

A repayment mortgage is when you repay the amount you borrowed over the whole of your mortgage term. You’re also paying the monthly interest charged. At the end of the term, your mortgage will be paid off. This doesn’t include any fees to be paid to close your account.

Changing your mortgage from an interest only to a repayment basis will increase your current monthly payment. Your new payment will still need to be affordable so you don’t fall into financial difficulty. To keep your monthly payment lower, you can extend the term of your mortgage when you change on to repayment. This means you’ll end up paying more interest overall as you’ll have the mortgage for longer.

If you think this is something you’d like to do:

• Use our repayment calculator to see how much your new payment would be
• Use our change your term calculator to see how changing your term would affect your monthly payment
• Call us on 0800 169 9712*. We’ll talk through your circumstances and agree the best option for you.

* Calls are recorded for training and monitoring purposes. Lines are open 9am–5pm Monday to Friday. We’re closed on Bank Holidays.

Making regular or lump sum overpayments will help you to reduce the amount you owe at the end of your mortgage term. Use our overpayment calculator to get an idea of how overpaying can affect your balance or monthly payment. You might be surprised by the difference it makes.

Be careful not to overpay more than you can afford. If you have any questions, we recommend you:

• Visit moneyhelper.org.uk or call them on 0800 138 7777 for free and impartial money guidance
• Speak with an independent financial adviser – there may be a charge for this.

Visit our overpayments page for details.