Everything you need to know about Interest Only Mortgages

It is thought that 2.6 million people in the UK have interest only mortgages and are unsure how they will repay the loan at the end of the term. It is essential that you speak to a specialist mortgage broker to fully understand the options that are available to you.

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When an Interest Only Mortgage comes to the end of its term it will be required to be re-paid. This can cause a lot of uncertainty and worry if there is not a repayment vehicle in place.

What is an interest only mortgage?

An interest only mortgage is a loan for a property that allows you to pay off just the interest on your borrowing each month, and not the capital. This means your monthly payments don’t pay off any of the loan – instead, you pay the full amount back at the end of the mortgage term in one lump sum.

How do interest only mortgages work?

With an interest only mortgage, the size of your debt stays the same throughout the mortgage term. This is different from a repayment mortgage, where you pay back both interest and capital each month. This allows you to chip away at your debt so by the end of the term you’ve fully repaid the original sum borrowed.

How do you repay an interest only mortgage?

  1. Remortgage. You can repay an interest-only mortgage simply by taking out another mortgage (which could be repayment or another interest only one).
  2. Sell the property.
  3. Use savings & investments.

What should I do if I have an interest only mortgage?

If you have an interest only mortgage it is imperative that you have a vehicle in place to repay the debt. If you are worried about how you will repay the mortgage at the end of the term then complete our enquiry form and we will match you with specialist mortgage broker who will be able to explain the options available to you.

Speak to a specialist

A specialist interest only mortgage broker will be able to understand your circumstances and find the most appropriate mortgage deal to fit your circumstances and financial situation. Complete our enquiry form to be matched to a specialist mortgage broker.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the brokers we introduce you to, to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All brokers we introduce you to are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.