A repayment mortgage is when your monthly payments go towards paying off the amount you’ve borrowed (the capital) and some of the interest too. As long as you make all your payments, you’ll definitely have paid off everything you owe by the time your mortgage term ends.
Interest-only mortgages are just that - you only pay back the interest on your mortgage, and not the actual loan amount. At the end of your mortgage term, you’ll need to pay the whole loan back in one go, usually by selling the property or using investments.
Yes, you can change your mortgage from repayment to interest-only. Depending on your situation at the time, you can apply to remortgage onto an interest-only deal. You’ll need to check when your current deal ends if you’re on a fixed rate, as you could be hit with big fees for changing your mortgage.
If your financial situation has changed temporarily and you’re struggling to keep up with your mortgage payments, you can ask your lender to switch you to interest-only temporarily. This will bring your payments down for a short time while you find your feet. All lenders are different though, so it’s best to talk to them as soon as possible if you’re considering it.
Switching mortgages can be a tricky business, especially if you have complex circumstances like bad credit or self-employment. We work with specialist advisors who deal only with the tricky stuff. Make an enquiry to find out your options.
Whether it’s a good idea to change your repayment mortgage to interest-only depends on your individual situation.
If you’re looking to pay less each month, then switching to interest-only can help you free up some cash from your paycheck to go towards other things. This could be helpful if you’re going through a difficult time or are bringing in less money at the moment.
However, you’ll need to be able to show your lender a proper plan for how to intend to pay off the loan at the end of the mortgage. Lots of lenders will be happy to consider a temporary switch to interest-only, but you’ll still need to show you’ve got a plan in place.
Different lenders have different requirements for what they’ll accept as your repayment plan. Your interest rate might also change depending on what your plans are. Here’s some methods for repaying your loan that could be acceptable:
Money you’ve saved over the course of your mortgage
Investments like stocks or shares
The sale of another property you own
The sale of other assets
Equity is one of the most important factors which will determine if you can change to interest-only. You’ll need to have a decent amount of equity (the amount you actually own) in your home before you can change. The more equity you have, the better your chances.
It may still be possible to change to interest only if you don’t have a lot of equity. Some lenders might offer what’s called a ‘part and part’ mortgage - where you pay some of your loan and some of your interest. In this case, you’d pay interest-only until you max out your lender’s loan to value (LTV), then you’d pay the rest as a repayment mortgage.
Changing mortgages can be really confusing. So it’s a good idea to work with a mortgage broker who can explain your options clearly and advise the best plan for you.
Mortgage lenders work out how much you can afford to borrow the same way regardless of whether you’re applying for an interest-only mortgage or a repayment mortgage. Even if you apply for an interest-only mortgage, you’ll be assessed as if you were applying for a repayment mortgage. So you won’t necessarily be able to borrow more when going for interest-only.
Mortgage lenders each have their own way of working out how much you can borrow, this is called their lending criteria. So it will all depend on which mortgage lender you apply to.
Yes, you can change your repayment mortgage to interest-only if you’re self-employed. A lot of lenders will need you to have three years’ worth of accounts to do so, but some will only ask for one year.
It’s still possible if you don’t have a year’s accounts. There are specialist lenders who will look at what you can provide (such as retained profits), and consider your application on a case-by-case basis. Read more in our Guide: The Self-Employed Mortgage Guide
You can still change to interest-only if you’re a contractor. It all depends on the mortgage lender, as they all have different lending criteria.
Some lenders might need you to have worked in the same line of work for a while, and others may consider you if you’ve previously been employed in the same industry.
It’s definitely possible to temporarily move to an interest-only mortgage while on maternity leave. Taking time out from work to have a baby can make money tight, so it could be a good way to reduce your outgoings for a while. You’ll still have to prove that you can afford the repayments without struggling. You’ll also have to submit a plan for repaying the outstanding loan at the end of the mortgage.
Some lenders will need you to prove that you’ll be going back to work once your parental leave is up.
If you’re looking to borrow while on maternity leave, it’s a good idea to work with a mortgage broker who can find you a specialist lender. Specialist lenders aren’t the big banks you see on the high street. They specifically deal with the more complex cases, where things aren’t as straightforward! Make a quick enquiry to get matched to the right broker for you.
Yes, it’s definitely possible to move to an interest-only mortgage if you have bad credit! But it will be more difficult than if you had a perfect credit score.
It all depends on how recently you’ve had credit issues, and how severe they were. For instance, a few missed or late mobile phone payments will be viewed better than a recent CCJ or bankruptcy.
With credit issues, it’s best to deal with them head-on. Getting an up-to-date copy of your credit file is a great place to start. We recommend using checkmyfile - they’ve been around for over 20 years helping people understand the credit system, and it’s free for 30 days.
It’s a mortgage myth that you can’t get a mortgage if you have bad credit. In fact, there are a number of specialist lenders who deal exclusively with people who’ve had credit issues in the past.
The big banks might turn you down, but this isn’t a reason to lose hope. You just need to find a specialist mortgage lender who deals specifically with adverse credit. However, most of these lenders don’t deal directly with the public, you’ll have to work with a specialist mortgage broker to find them. That’s where we come in!
Our platform uses a clever algorithm to match you with the ideal broker for your unique situation - someone who can find you the right mortgage with the right lender, and make your application look great. Get started.
If you’re struggling to stick to your plan for repaying the loan at the end of your mortgage, you might be considering changing to a repayment mortgage.
Thankfully, it’s definitely possible to change from an interest-only mortgage to a repayment mortgage.
The upside of this is you definitely know your loan will be paid off at the end of the mortgage term. You’ll be chipping away at both the debt and the interest each month.
Mortgages can be really confusing, and sometimes it’s hard to know what’s best for you. It’s a good idea to speak to a specialist mortgage advisor who can look at your options and find the right mortgage for you. For the brokers we work with, complex stuff is all they do! They don’t shy away from a challenge. Make an enquiry to get matched to the perfect mortgage broker for your unique situation.
Over 50% of mortgages for people who are self-employed or have bad credit aren’t available directly to you. They’re only available through specialist brokers. Using our platform guarantees you’ll be matched with a broker who has a proven track record of making mortgages possible for people like you. Less processing, more understanding.
Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.