Interest only mortgages
Thinking about applying for an interest only mortgage? Learn more and find the best mortgage deal for you with NatWest.Get in touch
NatWest mortgages are available to over 18s. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
You’ll only pay the interest on your mortgage and nothing on the capital you borrowed. At the end of the mortgage term, you’ll still owe the full amount, so it’s important to have a repayment plan in place.
We may contact you from time to time to see if you’ll be able to pay off your mortgage at the end of the term. And it’s useful to keep the following in mind:
- Review your repayment plan regularly to stay on track
- Save more or switch to a repayment mortgage if your repayment plan is not right
- Enjoy no additional charges when you switch to a repayment mortgage
- Selling your home to repay the capital may not be enough as property prices rise and fall
- Failing to sell at the value you expect, may leave you short on equity to buy another property
Are customers generally able to pay back their interest only mortgages? According to the Financial Conduct Authority (FCA) they are. Their research shows that most people are able to repay their mortgage when it’s due.
But borrowers who need to repay their mortgages due to having no way to repay the mortgage in part or full, will have to take control of their repayment planning now. To help make that happen, the FCA, Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) work together. And lenders like us will soon be in touch with our customers to make sure their repayment plans are on track.
More about interest only mortgages
What is an interest only mortgage?
Your monthly payments only cover the loan’s interest. You’ll still need to pay the full amount at the end of the mortgage term. So you’ll have to get a repayment plan in place to pay off the capital. This can be an endowment, a stocks and shares ISA or pension plan. And if there’s a shortfall, you’ll have to repay all the capital at the end.
The total interest you’ll pay over the life of the mortgage will be greater than a repayment mortgage. And you may face a higher risk of negative equity, because the mortgage balance is not reducing.
What is a repayment mortgage?
Your monthly payments cover the interest on the loan and part of the capital. Over time, your capital balance will get lower. And at the end of the term, you’ll have paid off your mortgage (if you made all your repayments).
Does it cost me to change to a repayment mortgage?
We don’t charge a fee. But your payments to your mortgage will be higher.
Can I have a combination of repayment types?
We do offer a combination of repayment types. If you want to take a part of your mortgage on interest only, you’ll have to meet our qualifying criteria. Get in touch with us to see if you’re eligible.
What if my plan is not on track?
This all depends when your mortgage term ends and if you can use other savings or investments. You could:
- Pay more each month to lower the capital you owe
- Switch some or all of the capital to a repayment mortgage
- Use your savings to reduce the capital
Before you assume the value of your home has gone up, do some research first so you don’t get caught out.
Why not speak to an independent financial adviser or contact the Money Advice Service for free Advice?
Could I extend my interest only mortgage term?
This depends on your personal circumstances. The best way to find out is to contact us.
If I have concerns, who can I talk to?
Maybe you don’t have a repayment plan in place. Or you’re worried it won’t do as well as you first thought. Whatever your concern, simply get in touch with us. Our friendly team is based in the UK and ready to help.
We’ll walk you through all your options.
You could also contact an Independent Financial Adviser or the government’s free Money Advice Service for help.