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Mortgage Guide
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Mortgage Basics
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How to change from an interest-only to a repayment mortgage
With
an Interest-only
mortgages your monthly repayments cover only the
interest charged on the money youve borrowed.
This means your monthly costs are far lower than with a repayment
mortgage, where the repayments include a proportion
of the sum borrowed known as the capital as well
as the interest.
This option is also called a capital
and interest mortgage.
The problem with an interest-only loan is that
at the end of the agreed mortgage
term, you still owe the original amount borrowed
And, if you can't repay it, you will have to sell your home or
have it repossessed by the lender.
So, if you don't have some other way of clearing the
debt, consider switching to a repayment mortgage as soon as you
can afford it.
How to make the change
• If you can cope with the payments, switch the
whole debt to a repayment basis, or
• A cheaper option (in the short-term at least) is to switch
part of the debt to repayment, leaving the rest as interest-only.
• You can always change the rest later,
when your financial situation improves.
The first step
Begin by speaking to your existing mortgage
lender.
• It may agree to let you make the change and stay
on your existing mortgage deal, or
• If may offer you a new deal on different
terms, but be sure to find out what fees
are involved.
The second step
In either case, don't accept without shopping around
to see if you can get a better deal from another lender but
remember to include any fees in your comparisons.
If you take a new deal at a lower interest rate, your
monthly payments may not rise as much as you expect.
To find out more about comparing loans, read How
to spot a good deal.
For an idea of the deals and interest rates currently on offer,
see our Best
buy tables.
To read more on this subject please see the list below or your mortgage guide or your home buying guide
Read enough? Just want a quote? To get your best mortgage quote quickly and easily we can put you in contact with a recommended mortgage adviser. It's free, completely confidential and there's no obligation at all. Simply fill out the form below
Read On / Mortgage Basics
What is a mortgage?
A basic summary of the rules
How much can
you borrow?
How do you prove
your income?
How long are mortgages
usually for?
What will happen to interest rates?
Read On / Mortgage Guide
How to Choose your Mortgage
Types of Mortgage
Remortgages
Where to Find your Mortgage
Getting a Mortgage in Principle
Read On
Guide to Buying Home in the UK
Guide to UK Home and Mortgage Insurance
Browse over 200 Free Mortgage TipsYour Complete Guide to UK Mortgages Find Out How to Win the Race to Buy Your Home - Home Buyers Guide Learn How to Save ££s by Remortgaging Read the Insider Info on Home Insurance Site Help |
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