Your home or property may be repossessed if you do not keep up repayments on your mortgage
The capital you borrowed on an interest only basis must be repaid in full at the end of your Mortgage term.
You need to have a repayment plan to repay your capital. You should review your repayment plan on a regular basis to ensure that it remains on track. We may contact you from time to time and ask you to show us that you’re in a position to pay off your mortgage at the end of the term.
If your repayment plan is not on track, you need to take action now either to save more or switch to a repayment mortgage. There is no charge to switch to a repayment mortgage if this is a suitable option for you.
If, since getting your mortgage, you have decided that you will pay off your capital at the end of your mortgage by selling your property, you should remember that the value of your house will depend on house prices at the time of sale. If you cannot sell your property for the value you expect, you may not be able to pay off your mortgage in full and may not have sufficient equity to purchase another property.
The Financial Conduct Authority (FCA) has published its research into consumers’ ability to repay their interest-only mortgages when they mature. The findings show that many people should be in a good position to repay their mortgage when it is due for repayment.
However some borrowers, including those whose mortgage is due to be repaid before 2020, will need to take control of their mortgage repayment planning now. To that end the FCA, the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) are working together to ensure lenders contact their borrowers in order to prompt them into checking their plan for repayment is on track and considering the options available to them.
The FCA believes that with careful planning, consideration and engagement with their lender, many interest only borrowers - even those with loans maturing by 2020 - should be able to find a viable way to pay off their mortgage if they take control now.
If you have any concerns or questions please contact us using the details shown on the bottom of this page.
What is an interest only mortgage?
A mortgage where your monthly payments only cover the loan’s interest. The full amount borrowed still needs to be paid at the end of the mortgage term. A repayment plan needs to be in place to pay this capital off, like an endowment, a stocks and shares ISA or pension plan. If there is a shortfall, you are still liable to repay all the capital at the end.
The total interest you will 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?
A mortgage where your monthly payments cover the interest on the loan and part of the capital. Over time, your capital balance reduces. At the end of the term you’ll have paid your mortgage off, if all your repayments are made.
Does it cost me to change to a repayment mortgage?
We don’t charge a fee. But your payments to your mortgage will increase.
Can I have a combination of repayment types?
RBS no longer offer residential interest only mortgages, this includes a mixture of repayment and interest only. Customers with existing interest only mortgages are not affected by this change. Buy to Let mortgages remain available on an interest only basis.
If you currently have a mortgage that has any element of interest only, or you feel that you're having difficulties paying off your repayment mortgage, please feel free to get in touch on the details at the bottom of this page, to discuss your situation and what options might be available to you.
What if my plan is not on track?
It depends when your mortgage term ends and if you have any other savings or investments to use. Depending on your individual circumstances, you may be able to increase your monthly payments to reduce the capital owed, switch some or all of the capital owed to a repayment mortgage or use savings to reduce the capital.
In the last few years house prices have dropped, so we’d recommend caution about assuming the value of your house will have increased.
Check to ensure you’re on track to repay your capital. If you’re concerned, speak to an Independent Financial Adviser or contact the Money Advice Service for free Advice
Could I extend my mortgage term?
Possibly – this will depend on individual circumstances, please call us.
If I have concerns, who can I talk to?
If you don't have a repayment plan in place, or you do but are worried it won’t perform as well as you first thought, please contact our friendly team based in the UK. We are here to help if you are worried or don’t fully understand your obligations.
We’ll listen to you and walk you through the options available to help. You don’t have to have missed a payment to benefit from discussing your worries.
Get in touch
You could also contact an Independent Financial Adviser or the government’s free Money Advice Service for help.