What if I do not need to repay my interest only mortgage yet?
This is good news. You have time to act.
Try to make a plan as soon as you can. There are often more options the earlier you take action.
There may be reasons you want to wait until your mortgage needs to be repaid. There are other things you can do if this is the case.
1. Start making plans to repay the mortgage
- Try to pay off what you can even if you cannot pay the whole amount
- It gives you more options and can help you get another mortgage if you need it
2. Look at your budget
- Paying back your mortgage should be a top priority
- Keep this is mind when making spending decisions
- Try to put some money towards your mortgage each month
Need help making a budget?
What should I do if I can pay extra?
You have a few choices.
1. Switch your mortgage to a repayment mortgage
The means your payments cover:
- The interest and
- The amounts to repay the mortgage
This option repays the balance by the end of the term.
It increases your monthly payments the most.
Use this mortgage calculator from MoneyHelper to see what your payments might be.
You need to know:
- How much you owe
- The interest rate you are paying
- How long you have left on the mortgage
2. Switch your mortgage to a repayment mortgage and increase the term
Switching to a repayment mortgage is not always the best option. Like if you only have a few years left on your mortgage.
Ask your lender to increase the term of the mortgage.
This means:
- You pay the mortgage back over a longer period
- You pay more interest in total
Ask your lender how much more the interest would be.
3. Switch some of your mortgage to a repayment mortgage
You can switch part of your mortgage to a repayment mortgage to:
- Keep monthly costs down
- Repay some of the money you owe - though not all
This costs less than switch all the mortgage to repayment.
At the end, you repay the amount left on interest only.
Switching your mortgage changes your contract.
Make sure you can keep up with higher payments.
If you cannot make increased payments:
- You could go into arrears
- Your home could be repossessed
4. Make overpayments
Most lenders let you pay extra to your mortgage.
- This is not a change to your mortgage
- You can stop or lower the extra payments at any time
There could be some charges if you are in a deal or have a fixed rate.
Ask your lender how much extra you can pay without charges.
Is it better to put extra money in a savings account until I repay the mortgage?
Putting the money into a savings account is an option.
The benefits of this include:
- Having money if you need it in an emergency
- Being able to stop payments any time
But there are also some downsides:
- This can cost more than paying it towards your mortgage
- The interest on your mortgage is often higher than interest on savings
- It can be easy to stop saving or use the money for something else
- This could stop you repaying your mortgage