Repayment mortgages

This content applies to England only.

Housing laws vary between England and Scotland. Get advice relating to Scotland

A repayment mortgage is a ‘traditional’ mortgage, where your monthly payments repay some of the capital as well as interest on the amount you borrow. Provided you keep up your payments, your mortgage is guaranteed to be paid off at the end of the term.

If you have problems paying a repayment mortgage, you may have several options open to you.

Taking a payment holiday

If you have a flexible mortgage, you may be able to take a payment holiday. This allows you to miss one or more payments, and catch up on them later. Some mortgage deals may only allow you to take a payment holiday if you have previously made extra payments (building up a ‘holiday fund’).

If you don’t have a flexible mortgage, or have never made any extra payments, it may still be worth trying to negotiate a payment holiday with your lender. They are more likely to agree to this if you have not yet gone into arrears so don’t delay in asking your lender. Lenders will always prefer it if you speak to them as soon as possible.

Reducing or stopping capital repayments

If your difficulties are only likely to be short-term, your lender may agree to allow you to pay only the interest on your mortgage for a few months and not the capital. You will have to catch-up on the unpaid capital later, so you need to have a realistic plan for future payments which takes this into account.

Some lenders will refuse to allow you to pay interest-only if your mortgage is already in arrears. If this happens, contact a local advice centre. An adviser may be able to help you negotiate with your lender to reduce (rather than stop) your capital repayments to make them more affordable.

You may also be able to persuade your lender to accept reduced interest payments as well as stopping your capital repayments for a limited period. They will normally only do so if your problems are likely to be temporary (eg while you try to sell your home).

Extending the mortgage term

You might be able to negotiate with your lender to extend the number of years left on your mortgage (the 'term'). This will give you a longer period of time to pay back your loan, so your monthly payments will be reduced. The likelihood of your lender agreeing to do this usually depends on:

how large your arrears are
your age and expected retirement age
whether you have a permanent job
how much longer your current mortgage has left to run (many lenders will not extend a mortgage beyond 25-30 years, or beyond your expected retirement age).

If you do decide to take this option, you can ask your lender to reduce your mortgage term again when your financial situation improves or interest rates fall.

Adding the arrears to your mortgage

It may be possible to add any arrears you have to the rest of your mortgage – this is often called 'capitalising the arrears'. This will mean that you can make up any payments you have missed over the rest of the mortgage term. You will probably have to make higher monthly payments to catch up, unless you are also able to extend the term of your mortgage (see above).

You can normally only add your arrears to the rest of your mortgage if your financial situation is likely to improve. Most lenders will expect you to meet your regular mortgage repayments for at least six months before they will agree to this.

Scheduled repayments

If you think your situation will improve your lender may agree to vary your arrears payments, whereby you pay off less in the beginning and more later - this is known as scheduled repayments.