Your repayment plan 

If you have an interest only or part & part mortgage, when your mortgage reaches the end of its term, you’ll need to repay your outstanding balance to us as a lump sum.

There are various ways you can prepare to pay back your balance but you need to have a plan in place.

If you don’t have a plan or are worried that your existing plan isn’t on track to pay the lump sum please get in touch as soon as possible. It’s never too late to get started. The sooner you act, the more options you’re likely to have.

Here are some options you could consider as part of your plan.

Make overpayments

Making a lump sum overpayment or regular monthly overpayments will reduce your mortgage balance and the amount of interest you pay over the term of your mortgage. There’s no limit to the amount or frequency of overpayments you can make, and there are no early repayment charges to pay either.

Remember – whilst overpayments will help to reduce the balance you owe, you’ll still be left with an amount to repay to us at the end of your mortgage term, so you’d still need to consider this within your repayment plan.

Use savings or investments

You could use money in a savings or investment account (such as an endowment policy or pension) to repay the lump sum you owe at the end of the mortgage term.

Because the value of your investments could rise or fall over time, it’s important to review your position at least once a year. Otherwise, you could reach the end of your mortgage term and find yourself with less than you need to repay your outstanding balance.

Sell your property

If you plan to sell your property and use the proceeds to repay the amount you owe, you should think this through carefully and make sure the sums add up. Timing can also be crucial – so make sure you know when it’s right to sell.

You must consider the effect any drop in the value of your property might have on the sale price you can achieve. House prices won’t necessarily rise during the remainder of your mortgage term and you may need to sell during a dip in the market. You also need to consider any selling fees (such as costs of estate agents and solicitor) which could reduce the funds you have available.

It could also take longer to sell your property than you anticipated, so you need to keep an eye on the housing market in your area.

Switch your mortgage to repayment or part & part

You can opt to pay off your balance gradually each month, by switching to a repayment (capital & interest) mortgage.

Here, your monthly payments will be higher because as well as covering the interest you’re charged, they’ll also gradually pay back the balance you owe. But provided you stay on track with your monthly payments, the amount you borrowed will be paid off by the end of your mortgage term (excluding any mortgage exit fees). You could also pay less interest in total over the term of your mortgage.

Switching to repayment could give you peace of mind that you won’t need to sell your property to repay the amount you owe to us at the end of your mortgage term – which might otherwise be the case if you don’t have an alternative repayment plan in place.

Consider a part & part mortgage

If a switch to repayment (capital & interest) is unaffordable, you could consider switching part of your mortgage to repayment (capital and interest), whilst leaving the remainder as interest only. This is known as a part & part mortgage.

Here, the increase in your monthly payments compared to an interest only mortgage will be less than if you made a full switch. However, because part of your mortgage will remain on interest only, there will still be an outstanding amount to be repaid in full at the end of your term, so you’d still need to consider this within your plan.

If you can afford it, you can apply to increase the portion of your mortgage on repayment in the future. This would mean that your monthly payments would increase, but in turn it will also increase the amount of your mortgage that you’ll be paying off.

Move your mortgage to another lender

It may be possible for you to remortgage to another lender and find a more suitable mortgage that better meets your needs, perhaps with a lower interest rate or longer term.

If you live in your residential property, bear in mind that it can be very difficult to obtain another interest only mortgage – so you may have to consider a repayment (capital & interest ) mortgage instead. Your potential new lender will also need to carry out an affordability assessment and credit search to ensure your new mortgage is affordable and suitable for you.

If you’re a landlord with an investment property, it’s important to remember that most lenders now apply strict criteria for new buy-to-let mortgages. You may need  to provide a significant deposit, have a greater level of equity or provide a high level of rental cover relative to the amount you wish to borrow.

There’s a lot to consider, so in all cases, we recommend that you speak to a mortgage broker to discuss your specific circumstances. Please be aware that some brokers charge an advice fee for their services, so you may want to confirm this with them.

No plan to repay your Interest Only mortgage?

When your mortgage term ends, if we can’t agree on how you’ll repay your outstanding balance, we may need to take legal action that could result in the repossession of your property. Of course, this is always the last resort and we’ll do our best to work with you to find a better outcome.

If you don’t have a plan or you’re worried you won’t be able to repay the balance you owe at the end of your term, please talk to us as soon as possible.

There may be ways we can support or assist you, and our experienced team are here to help. We can’t offer you advice but will discuss your situation and help you work out what options are available to you. and highlight sources of independent advice.

Tell us your plans

We need an up-to-date record of your plan. You can use our online Self-Serve system to tell us about your plan or update any information you’ve previously told us.

Your plan must be robust enough to pay the lump sum at the end of your mortgage term. By sharing your plan with us we’ll be better placed to offer you support to keep it on track.

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