Overview

Frequently asked questions

Interest only mortgages FAQs

A part and part mortgage is a combination of capital repayment and interest only. Part of your mortgage is on capital repayment and will be paid off at the end of your mortgage term, but you’ll need a plan in place to repay the interest only balance at the end of your term.

A mortgage repayment plan (also known as a mortgage repayment strategy or vehicle) is the method used to pay off the amount borrowed on an interest only mortgage when your term ends (e.g. endowment, ISA etc). It’s important that your plan is on track to repay the full interest only amount by the end of the mortgage. If not, your home may need to be sold to repay the mortgage.

If you haven’t checked your plan for a while, it’s a good idea to make sure now that it will still be able to pay off the amount you borrowed. If it’s not on track, the sooner you act the more options you’ll have.

If you don’t have a plan or are worried that it isn’t on track, it’s important that you act now. Even if you’re a few years away from your mortgage end date, the longer you leave it the fewer options you’ll have to get your plan on track. You have a number of options:

Switch all or part of your mortgage to capital repayment

There’s no charge to change all or part of your interest only mortgage to a capital repayment mortgage.

If you’d like to change how you repay your mortgage, please give us a call on 0800 30 20 11. You can find more information on this process here.

Make overpayments

You can either make a lump sum overpayment or set up regular overpayments, but first check your mortgage offer to see if an Early Repayment Charge (ERC) would apply to any overpayments. You can make lump sum overpayments using Internet Banking. If you’d like to set up a regular overpayment please call us on 0800 30 20 11 and we’ll set this up for you.

Save more

  • Check the current predicted value of your repayment plan by contacting your provider, then work out how much you’ll need to save to be able to fill the gap between this and your mortgage balance.
  • Choose a savings or investment product to put the money into. You can get advice from an Independent Financial Adviser on the best way to save. A list of Independent Financial Advisers is available at unbiased.co.uk.

That’s great, but please remember it’s important to regularly check that your plan is still on track to repay your mortgage when it reaches its end date. If you think that your plan is starting to underperform at any time, follow these steps:

  • Check how many months and years your mortgage has left.
  • Contact your savings or investment plan provider or financial adviser to see what you can do to get your plan back on track.

If you’d like add or remove a borrower, as long as you have an acceptable repayment plan in place to pay off your mortgage at the end of your term, your mortgage can remain on interest only. The following are acceptable mortgage repayment plans:

Investment backed

  • Capital from trust funds
  • Endowment policy – new and existing
  • ISA - new and existing
  • Pension plan - new and existing
  • Premium bonds
  • Existing stocks and shares ISA (Formerly known as PEPs)
  • UK FTSE listed securities and shares
  • Unit & investment trusts

Sale of Property

  • Sale of only residence (subject to criteria)
  • Sale of other residential property in the UK (subject to criteria)
  • Sale of foreign property

If you're moving home and would like to take your existing mortgage with you, this is called porting.  Porting means you can transfer your existing product to your new mortgage for the remainder of its term. It’s possible to port an interest only mortgage but you’ll need to check your original offer to make sure you can do this, and you’ll need an acceptable mortgage repayment plan in place. The following are acceptable mortgage repayment plans:

Investment backed

  • Capital from trust funds
  • Endowment policy – new and existing
  • ISA - new and existing
  • Pension plan - new and existing
  • Premium bonds
  • Existing stocks and shares ISA (Formerly known as PEPs)
  • UK FTSE listed securities and shares
  • Unit & investment trusts

Sale of Property

  • Sale of only residence (subject to criteria)
  • Sale of other residential property in the UK (subject to criteria)
  • Sale of foreign property

Yes, you can apply to change the repayment method of your mortgage. If you’d like more information about this, please see change of repayment method.

We’ll contact you about 5 months before the end of your mortgage to remind you that you’ll need to repay the outstanding balance at this time. If you’re worried that your repayment plan won’t pay off the balance please call us as soon as you can on 0800 464 31 01 (Monday to Friday between 9am and 5pm).

If you’re worried that your repayment plan won’t pay off the balance please call us as soon as you can on 0800 30 20 11 and we’ll discuss the options available to you.

If you’d like advice on changes you can make to your mortgage, please give us a call on 0800 30 20 11.
If you’d like advice on a savings or investment plan to repay your mortgage you can find a list of Independent Financial Advisers at unbiased.co.uk.