Interest-only mortgage ending? Your options explained
When an interest-only mortgage is ending, the full amount you borrowed is due on the final day of the term. If you cannot repay it all, you still have options: repaying from savings, selling or downsizing, extending the term, switching to repayment, remortgaging, or later-life borrowing. Contacting your lender early usually gives you the most choice.
This guide is general information, not financial advice.
What happens when an interest-only mortgage term ends
With an interest-only mortgage, your monthly payments have covered only the interest. The original loan, often called the capital, is still owed in full when the term ends, to be repaid from savings, investments, an endowment or another plan. For example, on a £100,000 interest-only mortgage at an illustrative 5% a year, the monthly payments of about £417 have covered the interest, but the full £100,000 is still owed on the final day.
If you cannot repay in full, your lender will not usually move straight to repossession. Lenders regulated by the Financial Conduct Authority (FCA) must treat customers fairly, and repossession is generally a last resort once other options have been explored.
The bigger risk is not replying: lenders can only help if they understand your situation.
When your lender will get in touch
Many lenders contact interest-only borrowers several years before the term ends, and again closer to the date, asking how the balance will be repaid.
It is worth replying even if you do not have a plan yet. Before you call, it helps to have:
- your mortgage account number and outstanding balance
- a realistic picture of your income, savings and other assets
- the current value of any repayment plan, such as an endowment, ISA or pension lump sum
Your options when an interest-only mortgage is ending
Which options are open to you depends on your age, income, the value of your home and how much you owe.
Repay from savings, investments or an endowment
If you have savings, investments, a pension tax-free lump sum or a maturing endowment, you may be able to repay some or all of the balance. If an endowment has fallen short of its target, our guide to endowment shortfalls explains what you can do.
Sell or downsize
Selling and moving somewhere smaller or cheaper can clear the mortgage and may leave money over, though moving has its own costs and upheaval. Our guide to downsizing covers the practical side.
Extend the term or switch to repayment
Some lenders may agree a longer term, subject to affordability and age limits; see interest-only term extensions. Others may let you move some or all of the loan onto a repayment basis, which raises monthly payments but reduces the balance. See switching from interest-only to repayment.
Remortgage
You may be able to remortgage with your current lender or a new one, though this is not guaranteed: lenders will check your income, age and repayment plan.
Retirement interest-only mortgage or equity release
A retirement interest-only (RIO) mortgage lets you pay the interest each month, with the loan usually repaid when you die, move into long-term care or sell. You need to show you can afford the payments. Our guide to retirement interest-only mortgages explains more.
Equity release, usually through a lifetime mortgage, is typically available from age 55 and can repay the existing mortgage without monthly payments. Interest then builds up, which reduces what you leave behind. Read how equity release works before deciding.
If you cannot repay an interest-only mortgage
If none of the options above works straight away, tell your lender as soon as you can. They may be able to give you more time to sell, agree a short extension or set up a temporary arrangement. What is available varies between lenders.
Repossession can happen if no solution is agreed, but it is usually a last step after other options have been considered.
Getting help early
MoneyHelper, the free government-backed guidance service, has information on interest-only mortgages and can point you to free debt advice if you are worried about arrears.
For a recommendation on a specific product, such as a remortgage, RIO mortgage or equity release, you would need an FCA-regulated adviser. Our guide to later-life mortgages compares the main options side by side.
Not sure which option fits your circumstances?
Written and reviewed by the Later Life editorial team. Last updated .
Frequently asked questions
What happens if I cannot repay my interest-only mortgage when the term ends?
The full balance becomes due, but reaching the end date without the money does not usually lead straight to repossession. Lenders are expected to treat customers fairly and to look at options such as a short extension, a switch to repayment or time to sell. Repossession is generally a last resort.
When will my lender contact me about the end of my interest-only term?
Many lenders write to borrowers several years before the term ends to ask how the balance will be repaid, and again as the date gets closer. It is worth replying to these letters even if you do not yet have a plan.
Can I extend my interest-only mortgage term?
Some lenders may agree to extend the term, but it is not automatic. They will usually look at your age, income, the value of your home and whether you have a credible way to repay at the new end date. Our guide to interest-only term extensions explains what lenders tend to check.
Could a retirement interest-only mortgage replace my existing mortgage?
For some homeowners, yes. A retirement interest-only (RIO) mortgage is usually repaid when you die, move into long-term care or sell, so there is no fixed end date, but you must show you can afford the monthly interest from your income. See our guide to retirement interest-only mortgages for how they work.
Where can I get free help if my interest-only mortgage is ending?
MoneyHelper, the government-backed guidance service, offers free and impartial information on mortgage problems, and free debt advice charities can help if you are worried about arrears. For a recommendation on a specific product, such as a remortgage or equity release, you would need to speak to an FCA-regulated adviser, who may charge a fee.