Switch to a repayment or part & part mortgage
If you have an interest only mortgage, when your mortgage reaches the end of its term, you’ll need to repay the amount you owe us as a lump sum.
We’re unable to extend the term of an interest only mortgage and we can’t offer new mortgage deals or further loans to customers.
We may need to take action to repossess your home if you’re unable to pay the full amount at the end of your term – and if you sell your property, you could be taken to court to recover any shortfall if the sale price achieved does not cover the balance you owe.
There are various ways you can prepare to pay back the balance you owe or minimise any potential shortfall. One way to do this is to switch to a repayment (capital and interest) mortgage.
Switch to repayment
With a repayment mortgage, your monthly payments cover your interest charged and they also gradually pay back the balance you owe. Your payments will be higher than with an interest only mortgage, but provided you stay on track with your monthly payments, the amount you borrowed will be completely paid off by the end of your mortgage term. You’ll also pay less interest in total over the term of your mortgage.
As a homeowner, switching to repayment could give you peace of mind that you won’t need to sell your house 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.
Depending on what happens with house prices, reducing your balance could also improve your loan to value ratio – which is the amount you owe compared to how much your property is worth. If you’re looking to remortgage, this could be beneficial, as many lenders offer cheaper interest rate deals on mortgages with lower loan to value ratios.
Switch to a part & part
If a switch to full repayment is unaffordable, you could consider switching part of your mortgage to capital and interest, whilst leaving the remainder as interest only. This is known as a part & part mortgage.
Here, your payments will cover the interest you’re charged and will also reduce your balance, although by a smaller amount than with a full repayment mortgage. As a result, the increase in your monthly payments will be less than if you made a full switch. Because part of your mortgage will remain on interest only, there will also 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.
With a part & part mortgage, you can increase the portion of your mortgage on repayment in the future, if you can afford to do so. This would mean that your monthly payments would increase, but in turn it will also increase the amount of your loan that you’ll be paying off.
Switch to repayment or part & part calculator
Use our calculator to see the impact of switching from interest only to a full repayment or a part & part mortgage, in terms of the total amount of interest paid and the balance owed at the end of the mortgage term.
Using this tool
You’ll need to know your outstanding balance, current interest rate and how long is left on your mortgage. You’ll also need to have an idea of what percentage of your mortgage you’d like to switch.
You may have a Together mortgage with a mortgage and an unsecured loan. If so, you should only input the details for your mortgage part into this tool, as your unsecured loan part will already be on a repayment (capital & interest) basis.
If you have a standalone unsecured loan, your loan will already be on a capital & interest (repayment basis) so this calculator is not relevant for you.
If your mortgage is made up of multiple sub-accounts, you won’t be able to use the calculator and you’ll need to call us to discuss your situation.
Understanding the results
Our calculator shows how switching to either a full or partial repayment mortgage reduces both the total amount of interest paid and the balance owed at the end of the mortgage term.
The results you’ll see are based on the information you have entered for your outstanding balance, current interest rate, remaining term and the percentage of your mortgage that you’d like to switch.
Our calculator uses a simple method to determine the amount of interest you’ll pay on your mortgage, by dividing the total amount of interest you’ll pay over a full year into 12 equal monthly amounts.
Since interest on your mortgage may be calculated differently (such as on a daily basis), then the actual impact of switching all, or part, of your mortgage to repayment may differ slightly to the figures shown in the calculator.
Our calculator also makes several other assumptions, including:
- You make your standard monthly payment every month over the full remaining term of the mortgage.
- There is no change to your interest rate over the full remaining term of the mortgage.
- There are no fees or charges added to your mortgage.
- There are no other changes to your mortgage which would result in a recalculation of your monthly payment (e.g. changes to your remaining term or any overpayments).
Since some of these assumptions may not apply to your mortgage, the results of this calculator should only be used as a guide.