Your home or property may be repossessed if you do not keep up repayments on your mortgage.
What is an interest only mortgage?
With an interest-only mortgage your repayments only cover the interest on the amount you borrowed.
This means your monthly payments don't pay off any of the amount you initially borrowed - instead, you pay the full amount back at the end of the mortgage term in one lump sum.
You will need to have a plan in place to repay your capital at the end of the mortgage term.
- You should review your repayment plan on a regular basis to ensure that it remains on track.
- We may contact you from time to time and ask you to show us that you’re in a position to pay off your mortgage at the end of the term.
- If your repayment plan is not on track, you need to take action now either to save more or switch to a repayment mortgage. There is no charge to switch to a repayment mortgage if this is a suitable option for you.
- If you have decided that you will pay off your capital, at the end of your mortgage term, by selling your property, you should remember that the value of your house will depend on house prices at the time of sale.
- If you cannot sell your property for the value you expect, you may not be able to pay off your mortgage in full and may not have sufficient equity to purchase another property.
Information for customers already on an interest only mortgage
The Financial Conduct Authority (FCA) has published its research into consumers’ ability to repay their interest-only mortgages when they mature. The findings show that many people should be in a good position to repay their mortgage when it is due for repayment.
However some borrowers will need to take control of their mortgage repayment planning now. To that end the FCA, the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) are working together to ensure lenders contact their borrowers in order to prompt them into checking their plan for repayment is on track and considering the options available to them.
The FCA believes that with careful planning, consideration and engagement with their lender, many interest only borrowers should be able to find a viable way to pay off their mortgage if they take control now.