What is a mortgage repayment plan?
Also referred to as a repayment vehicle or repayment strategy, it is the method used to repay the amount you borrowed at the end of your interest only mortgage term, or to repay the interest only element of your part and part mortgage. For example, you may use savings, investments, pensions, endowments, you may overpay regularly or sell other assets like another property. Or your plan may involve using a combination of these methods.
It’s important to have a repayment plan and to check it regularly, so you know you will be able to repay your mortgage in full at the end of term.
If your repayment plan is to sell your home, you should consider where you will live and if you will have enough money from the sale of your home to repay the mortgage and buy or rent another property. If you think you may not be ready to move when your mortgage term ends, you should think about other repayment options now.
The more time you allow yourself to look at repayment options, it’s likely a greater number of options will be available to choose from.
Check your plan is on track
You should check your repayment plan regularly to make sure you’ll have enough funds to pay off your mortgage when the term ends.
- Review your annual mortgage statement, check the balance and the time you have left before your mortgage ends.
- Check how your plan is performing:
- Contact any investment, pension, funds, or savings providers and ask if your plans are on track to pay your mortgage balance when it ends. Providers should be able to give you an estimate if you let them know when you will need to access the money. If they’re not performing as expected, find out how much extra you may need to invest or save.
- If you plan to sell your property to repay the mortgage, consider the value of your property. How much money will be left when you’ve repaid the mortgage, known as the equity, will this be enough for you to move if you currently live in the property.
- Consider making overpayments; the Money Savings Expert website has a useful overpayments calculator that will show the impact of making a monthly overpayment or annual lump sum payments for the remaining term of your mortgage. Find out more here.
- Use our Income and Expenditure form to work out how much you can afford to top up your investments or overpay each month.
- Get help. If your repayment plan does not give you enough money to repay your mortgage you may have to sell your property to pay back the mortgage.
Many customers experience a change in circumstances that may affect their repayment plans. Don’t leave it too late, get help and advice if you’re concerned or if you think you’ll need to change your repayment plan. The sooner you act the more options you’ll have to choose from.
It’s also important to keep us up to date with any changes to your plans or concerns you may have. We’ll check in with you regularly to find out how your plan is performing and if you need any support or guidance.
If you’re looking for a financial adviser, MoneyHelper explains the services a financial adviser can offer and how to find the right one here. Alternatively, you may be looking for specialist mortgage advice, visit unbiased.co.uk to find an adviser in your area that specialises in later life lending mortgage advice.
Or if you’re approaching the end of your mortgage term, call and speak to us on 0333 300 0921.
Overpay to reduce your mortgage balance
If you’d like to reduce your balance before your mortgage term comes to an end, you could make regular or lump sum overpayments. And if your initial period has ended (which could have been a fixed or tracker rate), you can overpay without paying an Early Repayment Charge.
The Money Savings Expert website has a useful overpayments calculator that will show the impact of making a monthly overpayment or annual lump sum payments for the remaining term of your mortgage. Find out more here.
If you decide to overpay, you could make regular overpayments via the phone or by using our online services, or you could set up a Standing Order.
If you prefer to make overpayments as and when you have spare cash, you could also make one off lump sum payments.
Switch your mortgage to capital repayment
If you’re looking for peace of mind that your mortgage will be paid by the time you reach the end of your mortgage term, you could consider switching to a capital repayment mortgage.
There’s no charge to switch your mortgage from interest only (or part and part) to a capital repayment mortgage. And if you’d like to enquire about changing your term at the same time to make the monthly payments more affordable, we can assess both changes together.
Call us to find out how the change would impact your monthly payments on 0333 300 0921 and if you’d like to apply, we’ll send out an application pack. Once we receive your application, we’ll check to make sure the payments are affordable.
Get the right support and advice
There are different organisations offering advice, so consider what may be helpful to your specific circumstances. For example:
- If you’re looking for an investment product, you may be more likely
to find one that meets your needs based on advice and a
recommendation. A financial adviser can also provide advice on
tax relief and allowances that may be available.
- If you’re approaching retirement and have important decisions to
make, a financial adviser can provide guidance on your complete
financial situation to make sure think about broader implications of
any decisions you make.
- You may be looking for specialist mortgage advice relating to later
life lending, lifetime mortgages or equity release products. A
mortgage adviser will assess your circumstances and find a
product that meets your needs. Look out for the Equity Release
Council endorsement mark to make sure you’re using a trusted
provider.
- Using a financial or mortgage adviser, may also give you access to a wider range of choices than if you were to search on your own.
Advisers must be clear about their fees upfront and it is worth considering that some financial and mortgage advisers will offer a first meeting for free. So, if you’re not sure what type of advice would be helpful to you, you could ask for an initial meeting to understand more.
If you’re looking for financial or mortgage advice, MoneyHelper explains the services that an adviser can offer and how to find the right one here.
What happens at the end of your mortgage term?
The remaining mortgage balance will need to be repaid, in full, at the end of your mortgage term. This is the amount you borrowed to buy your property at the start of your mortgage, minus any overpayments or capital reductions you have made.
You should request a redemption statement to understand your final balance, and the amount required to repay your mortgage in full.
If you can’t repay your mortgage in full, you should contact us to discuss what other repayment or support options we may have available. Although the full balance will be due for payment, we will work with you to find a suitable repayment option, especially as we find most customers just need a little more time. Our team can be reached on 0333 300 0921, Monday to Friday, 9.00am – 5.30pm.
You could also contact StepChange Debt Charity who offer specialist support to those nearing the end, or at the end of their interest only mortgage term and struggling to repay the balance. They can offer independent advice on your options, including the possibility of remortgaging and can be contacted on 0808 1686 719, Monday to Friday, 9.00am – 5.00pm.
