Interest-only mortgage repayments mean your monthly payments only cover the interest that you owe to us on your principal loan balance. Your principal loan balance – the amount you initially borrowed from us – will remain payable and will not be reduced during this period.
That means you’ll pay more money in interest payments over the lifetime of your loan and your monthly payments will increase when you start to repay the principal balance.
The following illustration shows the impact of temporarily paying interest-only for 6 months on an outstanding balance of £200,000 paying interest of 6% with 25 years remaining on the mortgage.
The current repayments
The interest-only monthly repayments
The repayments after 6 interest-only repayments
Total increase to the monthly repayment
Your monthly repayments
The current mortgage
After 6 interest-only repayments
Additional interest payable
The total amount to pay back over your whole mortgage
The total amount of interest to pay
In this case, the APRC increases from 8.68% to 8.69% and the homeowner would pay an extra £2,522.12 in interest over the course of the loan.
Please contact us if you’d like to see a personalised illustration for your mortgage with us. We’re happy to discuss this option if you’re struggling to make your payments, but it may not be right for you.