With an interest-only mortgage, your monthly payments only cover the interest on the amount you've borrowed. This means you won't actually be reducing the loan and at the end of the mortgage you'll still owe the amount you borrowed to buy your property.
For example, as the below table shows, borrowing £200,000 over 25 years with an interest-only mortgage would require a monthly payment of £417 and after the 25 year term you'd still owe £200,000. A repayment mortgage would require a monthly payment of £897 and after the 25 year term the balance remaining would be £0.
It is therefore important that you have a plan in place to pay off any interest only mortgage when the term ends, otherwise you could risk losing your home. You might put money into an investment plan or a high-interest savings account, for example. This obviously comes with risks so you'll need to consider:
There are a number of ways that you can put money aside to pay off your mortgage at the end of its term. Here are the types of repayment plans we accept and the evidence we'll need to assess them:
*If you have an interest only mortgage and are applying for a Further Advance, the minimum repayment vehicle values do not apply.
As with any investment there is a risk that it will be insufficient to repay your outstanding mortgage at the end of the term and could mean your property needs to be sold to repay the mortgage. We will not provide advice on your investment plan and strongly recommend that you take independent advice.
All you need to do is complete our
Declaration of Intent Form (PDF)
and provide supporting evidence to let us know your repayment plan. For details of the evidence required please see above. Once complete, send the Declaration of Intent along with photocopies of your most recent statements/projections to:
TSB Bank plc
PO Box 2230
If you think your repayment plan isn't going to cover everything you'll owe at the end of the mortgage term, call 0345 835 3389.
Or if you've recently changed your repayment plan and need to update us, just follow the same Declaration of Intent process above.
Staying on top of your finances throughout the life of your mortgage will help you keep on track or even reach your goal sooner. For example, if you feel like your investment isn't growing as much as it should be then the earlier you address it the better. Or if you come into some unexpected money, you may choose to put it towards paying off some of the capital of your mortgage before the end of its term.
While it's your responsibility to keep an eye on your repayment plan, we also have a responsibility to ensure we support you in any way we can. That means we might ask you to provide up-to-date evidence of your repayment plan every now and again. And if you're not on target, we could be able to help you find a solution.
Please contact us on 0345 835 3389 as soon as possible so we can discuss the options and help you put a plan in place. Lines are open 8:30am - 7pm Monday to Friday and 8:30am - 1pm on Saturdays.
These are some of the repayment plan options available:
If you have a plan in a place but you don't feel it'll cover the amount owed at the end of your mortgage, please call 0345 835 3389 and we'll be able to go through the options available to you.
If you're worried about keeping up your mortgage repayments, the best thing to do is speak to us. We can talk through the various options available and we'll try as best we can to resolve the issue.
Find out more about what you can do if you're facing financial difficulty.
From advice on repayment plans to remortgaging, you can get free, unbiased information on interest-only mortgages via the
Money Advice Service website
Want to speak to someone about your mortgage?
If you'd like to speak to someone who can review your mortgage, please call 0800 056 1088. Lines are open from 8am - 8pm Monday to Friday and 9am - 4pm on Saturdays.
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0800 056 1088
Get an indication of how much your mortgage repayments will be.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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