Switching all or part of your mortgage to repayment
Switching all of your mortgage to repayment
With an Interest Only mortgage, your monthly payments only cover the interest on the current balance owed. Your payments are not reducing the balance of the loan you originally borrowed. However, you can opt to pay off the loan balance gradually, over the full term of your mortgage, rather than in a single payment at the end. You can do this by switching to a Repayment mortgage.
With a Repayment mortgage, as long as you stay on track with your monthly payments your mortgage will be completely paid-off at the end of the term, so you will eventually own your property outright.
Switching to Repayment will increase your monthly payments, but the additional amount could be less than you think. Our Repayment Calculator will show you how much you would need to pay each month, or you can call us to discuss.
Switching a part of your mortgage to repayment
If a full switch to a Repayment mortgage costs too much, then you may consider changing just part of your mortgage to Repayment, whilst keeping the remainder as interest only. This is called a Part and Part mortgage.
The increase in your monthly payments will be less than with a full switch to repayment, so this option could be more affordable. And if your financial situation improves in the future, you can always increase the portion of your mortgage on repayment, and 'step up' your monthly payments to increase the amount of your loan that you will gradually be paying off.
With a Part and Part mortgage, whilst you will not pay off your entire loan over the term of your mortgage, you will reduce the balance you owe. This could help if you are facing a shortfall from your savings or investment plan, or if you eventually sell your property in the future for less than you expect. Alternatively, if you are thinking of remortgaging to another lender, reducing your balance could be beneficial as this might help you increase the equity in your property and potentially give you more remortgage options.
Please contact us to discuss how Part and Part may work for you. We can then provide you with details of how much extra you would have to pay each month.