If you currently have an interest only mortgage and are considering switching to repayment, you are not alone. Many borrowers reach a point where they want the security of knowing their mortgage will be fully repaid, or their lender contacts them to review their repayment strategy. This guide explains the process, what it means for your monthly payments, and the options available if the full switch is not affordable.
For a full overview of how interest only mortgages work, read our complete guide to interest only mortgages.
Why Would You Switch from Interest Only to Repayment?
Most borrowers switch because they want the certainty that their mortgage will be fully repaid by the end of the term, or because their lender has asked them to demonstrate a credible repayment strategy. Here are the most common reasons:
- Security and peace of mind: Knowing that your mortgage balance is reducing with every payment, rather than staying the same, provides certainty that the debt will be cleared.
- Repayment vehicle concerns: If your original repayment strategy is underperforming or no longer viable (for example, an endowment policy that has fallen short), switching to repayment eliminates the need for a separate repayment vehicle.
- Lender pressure: Your lender may write to you asking you to demonstrate how you plan to repay the capital. If you cannot provide a credible plan, they may encourage or require you to switch.
- Approaching retirement: If you are getting closer to retirement, clearing the mortgage before you stop working can significantly reduce your income needs and financial stress.
- Changed circumstances: Your income may have increased since you first took the mortgage, making full repayment affordable where it was not before.
How Do You Switch from an Interest Only to a Repayment Mortgage?
You can usually switch by contacting your current lender and requesting the change, which avoids a full remortgage application. Alternatively, you can remortgage to a new lender on a repayment basis. Here is the typical process:
- 01
Contact your current lender
Most lenders will allow you to switch from interest only to repayment on your existing mortgage. This is usually a straightforward process that does not require a full remortgage application. Your lender will assess whether you can afford the higher repayment amount.
- 02
Affordability assessment
The lender will review your income and expenditure to ensure you can comfortably manage the increased monthly payments. This is a regulatory requirement under FCA rules.
- 03
Review your options
Your lender may offer you a product transfer to a new rate at the same time as switching to repayment. Compare this with remortgaging to another lender, as you may find a more competitive deal elsewhere.
- 04
Confirm the switch
Once approved, the lender updates your mortgage terms. Your monthly payment will increase immediately to reflect the capital repayment element. No solicitor or valuation is usually needed if you stay with your current lender.
If your current deal has an early repayment charge, it may be more cost-effective to wait until the deal period ends before switching. A broker can calculate whether the savings from a new deal outweigh the cost of any early exit fees.
How Much More Will I Pay If I Switch to Repayment?
Your monthly payments will increase significantly — typically by 50% to 100% or more, depending on your outstanding balance, interest rate, and remaining term. The shorter the remaining term, the larger the increase because the capital must be repaid over fewer years.
| Scenario | Interest only payment | Repayment payment | Increase |
|---|---|---|---|
| £200,000 at 4.5%, 20 years remaining | £750/mo | £1,265/mo | £515/mo (69%) |
| £300,000 at 4.5%, 25 years remaining | £1,125/mo | £1,668/mo | £543/mo (48%) |
| £300,000 at 4.5%, 15 years remaining | £1,125/mo | £2,295/mo | £1,170/mo (104%) |
| £150,000 at 5.0%, 20 years remaining | £625/mo | £990/mo | £365/mo (58%) |
As the table shows, the remaining term is a critical factor. The shorter the remaining term, the higher the repayment amount because the capital must be repaid over fewer years. This is why acting sooner rather than later can make the transition more manageable.
Borrowers who switch from interest only to repayment earlier in their mortgage term face a smaller monthly increase, as the capital is spread over more years. Delaying the decision only makes the eventual transition more expensive.
What If I Cannot Afford to Switch to Full Repayment?
You have several alternatives, including a part and part mortgage, extending your term, making voluntary overpayments, or remortgaging to a new lender. Here are the details on each:
What Is a Part and Part Mortgage?
A part and part arrangement lets you switch a portion of your mortgage to repayment while keeping the rest on interest only. For example, if you have £300,000 outstanding, you might put £150,000 on repayment and keep £150,000 on interest only. This reduces the amount you need to find at the end of the term by half while keeping monthly payments more manageable than a full switch.
You can often increase the repayment portion over time as your income grows, gradually converting more of the mortgage to a repayment basis.
Can I Extend My Mortgage Term to Reduce Payments?
Extending the term of the mortgage spreads the capital repayment over a longer period, reducing monthly payments. For example, switching a £300,000 mortgage from interest only to repayment over 30 years at 4.5% would cost approximately £1,520 per month, compared to £1,668 over 25 years. However, extending the term increases the total interest paid over the life of the mortgage, and some lenders have maximum age limits at the end of the term (typically 70 to 75 years old).
Can I Make Overpayments Instead of Switching?
If you want to keep your interest only mortgage but start reducing the balance, many lenders allow overpayments of up to 10% of the outstanding balance per year without incurring early repayment charges. This informal approach lets you chip away at the capital at your own pace without formally changing your mortgage type.
Should I Remortgage to a New Lender?
If your current lender cannot offer suitable terms, remortgaging to a new lender on a repayment or part and part basis may provide access to more competitive rates or more flexible criteria. A mortgage broker can search the whole market on your behalf.
What Should I Check Before Switching from Interest Only?
- Early repayment charges: If you are in a fixed-rate deal, switching lender may trigger early repayment charges. Check your current deal terms before making a decision.
- Your existing repayment vehicle: If you have been building up investments or savings as your repayment vehicle, consider whether it makes sense to cash these in and reduce the mortgage balance before switching, or to continue investing alongside repayment.
- Retirement planning: Many lenders require the mortgage to be repaid by age 70 or 75. If you are approaching these limits, the remaining term for repayment may be short, resulting in higher monthly payments.
- Impact on your overall finances: Higher mortgage payments mean less disposable income for other financial goals. Make sure you can still maintain an adequate emergency fund and meet other obligations.
- Capital gains and tax: If you plan to sell investments to pay down the mortgage, consider any capital gains tax implications. Using your ISA allowance and capital gains tax allowance efficiently can minimise the tax impact.
Where Can I Get Help Switching from Interest Only?
A qualified mortgage adviser can help you understand all your options, model different payment scenarios, and find the most suitable deal for your circumstances. Switching from interest only to repayment is a significant financial decision, and if you are unsure about the best approach, speaking to a professional is a sensible first step.
If your interest only mortgage is approaching the end of its term, the situation is more urgent. Read our guide to what happens when your interest only mortgage ends for a full breakdown of your options.
Ready to explore your options? Complete our short online mortgage enquiry to be connected with an experienced adviser. There is no obligation and no impact on your credit score.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Switching from interest only to repayment will increase your monthly payments. Ensure you can comfortably afford the new amount before committing.
- Most lenders allow you to switch from interest only to repayment — contact your lender or remortgage to make the change.
- Switching increases monthly payments significantly — on a £300,000 mortgage, expect to pay around £543 more per month.
- The earlier you switch, the lower the monthly increase, because the capital is spread over more remaining years.
- If full repayment is unaffordable, a part and part mortgage lets you convert gradually while keeping payments manageable.
- Other options include extending the term, making voluntary overpayments, or remortgaging to a new lender with better terms.