With an interest-only mortgage, your monthly payment pays only the interest charges on your loan - it won’t reduce the loan balance. This means that although your monthly payments will be less than if you had a repayment mortgage, at the end of the mortgage term you’ll still owe the amount you borrowed. The overall cost of an interest-only mortgage will be higher because you will be paying interest on the full loan amount throughout the mortgage term.
Your home may be repossessed if you do not pay the full amount on the date agreed. You can also be taken to court to recover any additional shortfall if the sale price of your property does not cover the loan.
Helping you plan for tomorrow
Reviewing your options regularly and putting a plan in place to repay your interest only mortgage means you are more likely to have funds available to pay your outstanding balance when your term ends. It may seem a long way off but acting sooner rather than later can make a big difference.
From time to time, we may ask you to provide evidence of the plan you have in place to repay your balance at the end of the term. Please remember it is your responsibility to review this plan regularly and make sure you will have enough to repay what you owe.
If you have questions about your repayment plan or your repayment plan isn’t going to cover your balance, contact us to discuss or explore the options available to you by calling on 0330 159 6613 (8.30am - 5.30pm Monday – Friday).
You can also share details of your repayment plan by calling us, or download and complete our simple Repayment Plan Form and send back to Whistletree, PO Box 116, Skipton BD23 9FF.
It may be beneficial to review your options by contacting an Independent Financial Advisors (IFA) or to speak to one of the free, independent money advice organisations listed on our Help with payment difficulties page.
Reducing the balance of your mortgage
To make things more manageable, there are several ways for you to reduce what you owe before your lump sum is due, which can also save you money in the long run. Having a smaller balance at the end of your mortgage term can also make it easier for you to repay it. Here are a few options that can help you reduce your balance throughout the term of your mortgage.
Switching your interest rate
Switching to a lower interest rate could reduce your monthly payments, leaving you with more flexibility to make overpayments and reduce your mortgage balance. You are likely to be eligible for a new interest rate if your payments are up to date and you are not letting your property to anybody else. You can also switch to a new rate even if you’re currently tied to a deal but you should check whether any Early Repayment Charges apply.
Switching some or all of your balance to repayment
If you’re unsure if your repayment plan will cover the balance at the end of your term, or just to give yourself more peace of mind, you could consider switching all or some of your mortgage to a repayment basis. This means that instead of only paying interest on the balance, you’re also paying off what you owe. This can reduce the possibility of there being a shortfall when your mortgage ends. While your monthly payments will increase, the monthly cost could be less than you think. To see how much your monthly payment use our online Repayment calculator. You can also call us on 0330 159 6612* where we can arrange for you to speak to one of our qualified mortgage advisors.
Making overpayments on your mortgage
You can also make overpayments on your mortgage, as and when you can afford to. Overpayments can be a flexible, affordable way to decrease your mortgage balance without increasing the amount you have to pay every month. Each time you overpay, your balance will decrease which means you will pay less interest overall. Before making an overpayment, you should check whether any early repayment charges may apply. You can check this by referring to your mortgage offer or by contacting us on 0330 159 6612*. Use our online Overpayment Calculator to find out the difference even a small overpayment could make to your mortgage.
Paying off your mortgage with an investment plan
You may have decided to use a savings or investment plan such as an Endowment or Pension to repay your interest only borrowing. It’s important to keep track of these plans at least annually to make sure they will still cover your mortgage balance when they end, as they come with more risks than some other options. If your annual statement predicts a shortfall in your plan, you can or call us on 0330 159 6612*, use one of the repayment options already covered or speak to an IFA.
Moving to a different property
You may have decided that you want to sell your property and downsize or rent a property at the end of your mortgage term. When using this option it’s important to make sure you leave enough time for the sale of your current home to tie up with your mortgage term ending. The sale process can sometimes take longer than expected. As you get closer to the end of your term, you may also find it useful to have your home valued to make sure that when you sell it, you have enough funds to clear your balance.
