An interest only mortgage is where you only pay the interest on the amount you borrowed to purchase your house. This means that at the end of your mortgage term you will still owe the original amount you borrowed plus any fees added during the term of your mortgage. With a capital and repayment mortgage the monthly payments make a contribution towards both the original amount borrowed (the capital) and the interest.

If you have an interest only mortgage you need to make sure you have a repayment strategy in place to pay the amount you borrowed plus any fees added during the term of your mortgage when the mortgage term ends. It’s up to you to make sure you can repay the capital at the end of the mortgage term.

A repayment strategy can be an investment such as an endowment, ISA, or pension and it’s important to keep track of how your repayment strategy is performing. 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 you haven’t got a strategy in place, then we recommend that you get independent financial advice which will help you understand all the options that could be available to you. We can’t offer you advice regarding your repayment strategy.

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 so we can update our records.

What do I do if my repayment strategy isn’t on track?

If your repayment strategy isn’t on track to pay back all of the amount you borrowed (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.

We may charge an administration fee. Please see our Tariff of Mortgage Charges for further details.

Life is full of ups and downs and sometimes managing your finances can be a struggle. That includes keeping up the payments on your mortgage. If you’re worried about meeting your mortgage payments, it’s really important to let us know. Talking to us about your financial situation makes it easier for us to help you. Please visit our Money Worries section which has lots of support.

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A repayment mortgage will gradually reduce the capital 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.

• Use our repayment calculator to see how much you could be paying each month if you converted to a repayment mortgage.
• If you think this is something you can afford please call us on 0800 169 9712.

*Calls are recorded for training and monitoring purposes. Lines are open 9am– 5pm Monday to Friday. 03 calls cost no more than calls to geographic numbers (01 or 02). Calls from landlines and mobiles are included in free call packages.

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 shouldn’t overpay more than you can afford. If you have any queries, we recommend you speak to an independent financial adviser.

Visit our overpayments section for more information. There’s a handy calculator which will show you how much you could benefit from paying extra each month.

• 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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• The interest only mortgage on my property is due to end soon and I’m not sure I can repay the amount outstanding. What should I do?

  If you are worried that your repayment strategy is not sufficient to repay your balance in full by the term end date, please call us as soon as possible on 0800 169 9712 so we can talk to you about 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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