SWITCHING TO
CAPITAL REPAYMENT

We're here to help you understand how you can make the changes you want to your mortgage. If you’d like to switch from an interest only mortgage to a capital repayment mortgage; talk to us about changing your repayment method.

WHAT THIS CHANGE MEANS

If you currently have an interest only mortgage your monthly mortgage payments are only paying the interest due on the amount you borrowed. This means the original amount you borrowed will become due when your mortgage term comes to an end. For example, if you originally borrowed £150,000 over a 25-year term, on an interest only basis, and you pay all your contractual monthly payments on time and in full, you will still owe £150,000 at the end of the 25 year mortgage term.

With an interest only mortgage it is your responsibility to have a repayment plan in place that will help you to pay the original amount borrowed at the end of your mortgage term.

If choose to switch your mortgage to a capital repayment mortgage, your monthly payments will increase so they include the interest payment and an amount towards the capital (the original amount borrowed). Therefore, if you make all your contractual monthly payments on time and in full, your mortgage will be repaid when your term comes to an end.

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With an interest only mortgage it is your responsibility to have a repayment plan in place.

WHAT YOU SHOULD DO NEXT

Before making any changes to your mortgage we would always recommend that you seek independent financial advice so you can be sure that this is the best option for your circumstances.

We do not have the relevant permissions from the Financial Conduct Authority (FCA) to give advice, so our team will not be able to help you make a decision, they will only be able to execute your instructions.

If you’ve got some questions about the application process, have a look at our frequently asked questions and see if they can help.

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We always recommend that you seek independent financial advice.

FREQUENTLY ASKED QUESTIONS

Can you tell me how much my monthly payment will be if I switch to a capital repayment mortgage?

If you call our customer services team, they will review your account and give you an indicative figure based on the amount you borrowed, your chosen term and your current interest rate.


What if I would like to change the term of my mortgage at the same time?

We can assess both changes together, just make sure you let our team know when you call.


How do I apply?

To have an initial discussion about the application process for changing repayment type, please call our customer services team. We’re available Monday to Thursday 8.30am-6.30pm and Friday 8.30am-5.30pm.


How long will it take for you to review my application and reach a final decision?

As you are considering a switch from an interest only mortgage to a capital repayment mortgage, it is important for us to assess whether this change is affordable to you. Every application is unique and assessed by one of our underwriters; so once we have your fully completed application pack, with all the supporting information, our team will work hard to get you a decision as quickly as possible.


What should I expect when applying?

Our team will explain the process of changing repayment types to you and review your mortgage account and payment history. We will also ask you some questions about the current employment status of all the account holders, other debts they may have and their credit history. Once those checks are successfully completed, we will send you the application pack.


If the initial checks are successful, what else would I need to provide when I return the application pack?

As you’re considering a switch from an interest only mortgage to a capital repayment mortgage your monthly payments will most likely increase; by how much will depend on how long you have remaining on your mortgage term. We will need to ensure that switching to a capital repayment mortgage is affordable for you.

To enable us to do a full assessment and affordability check, all account holders will need to supply the following information when returning the completed application pack:

- Proof of Income

  • If you’re employed, send your last 3 months payslips and P60
  • For those who are self-employed, send your latest SA302 and latest tax year overview (obtainable from HMRC or your accountant
  • If you’re in receipt of pensions or benefits, please send the latest Annual Statement or Award Letter

- Income and expenditure information


Are there any costs involved?

There is a ‘change of repayment method fee’ of £55 which is payable upon return of your application pack.


How can I pay the ‘change of repayment method fee’?

You can make the payment over the phone using your debit card.


Can I apply if I have a buy to let mortgage?

Yes.

Please be aware mortgages are secured against your home and your home may be repossessed if you do not keep up repayments on your mortgage.