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Options if you cannot pay off your interest only mortgage

If your mortgage term ends soon

Speak to your lender as soon as possible if you cannot repay what you owe.

You might worry about talking to your lender, but they can work with you to come up with a repayment plan.

Your lender cannot ask for the money back until your mortgage term is up.

Get financial advice

You may have more options if you reduce your mortgage debt now.

You could try to reduce what you owe before your mortgage term ends.

Speak to a financial adviser to find out what's right for you.

MoneyHelper explains how to choose a financial adviser.

Have a money plan

Look at ways you can repay the money you borrowed.

It's a good idea to look into:

  • if friends or family could help

  • how much your home is worth now

  • your spending and other debt repayments

  • selling your home and moving into a smaller property

  • investments or pensions that will pay out before your mortgage ends

  • other money coming in, for example, compensation payments or an inheritance

Check with a financial adviser before cashing in investments or pensions.

Switch to a repayment mortgage

You could change to a mortgage where you repay the capital as well as the interest. This is called a repayment mortgage.

Your monthly payments go up but you can start paying off the capital you owe.

If you cannot afford to switch your whole mortgage this way, you could keep some of it on interest only to make sure payments are affordable.

Pay more each month

You can pay more each month to bring down the capital you owe. This is called overpaying.

Overpaying only reduces the capital you owe if you switch to a repayment mortgage.

You could consider this if you cannot afford to pay off a lump sum but still want to reduce the capital you owe.

There's likely to be a limit on how much you can overpay. There may be charges.

Extend your mortgage term

You could ask for a longer mortgage term to get more time to repay the capital. This can mean your mortgage payment does not go up as much, but you pay more interest overall.

A financial adviser may recommend extending the mortgage term if you want to change it to repayment to help you keep payments affordable.

Always get financial advice before you make changes to your mortgage.

Take in a lodger

Renting out a room in your home could help you raise money to make overpayments on your mortgage. The first £7,500 of rent paid to you each year is tax free. GOV.UK explains more.

Check with your lender before renting out a room.

Downsize or move house

Selling your home could pay off your mortgage.

Depending on how much equity you have, you might be able to move a smaller home or cheaper area and buy a home without needing a new mortgage.

Check the value of your property and the costs of selling your home. Make sure you can afford a new home before you decide to sell.

If you were mis-sold an endowment policy

Endowment policies are life insurance policies with an investment attached.

You may have planned to use the investment part of an endowment policy to pay off your mortgage.

Complain to the company who sold you the policy if it did not make as much as you were told it would. Ask for compensation.

If you are unhappy with their response, complain to the Financial Ombudsman Service. Their number is 0800 023 4567.

Complaints can take time. Even if your complaint is successful, the compensation will probably not pay off your mortgage.

You should also speak to a financial adviser about your options.

MoneyHelper has more on complaints about endowment policies and a letter template you can use.

How debt advice can help

Get debt advice straight away if you're struggling with other debts.

A debt adviser can:

  • look at your income and spending

  • help you work out a repayment plan with your lender

  • talk to other companies you have debts with to reduce your repayments

They could also help you access the breathing space scheme which can stop or delay your home being repossessed.

Last updated: 6 March 2023

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