Can I Extend My Interest-Only Mortgage Term?

If you’re approaching the end of your interest-only mortgage and feeling uncertain, you’re not alone. Many homeowners across the UK are asking the same thing: Can I extend my interest-only mortgage term? The short answer is – sometimes, yes, but it depends on your lender, your financial circumstances, and how much time you’ve got left on your current deal.

Let’s take a closer look at how it works, what your options are, and what you should be aware of if you’re thinking about extending your term.

What Is an Interest-Only Mortgage?

With an interest-only mortgage, you only pay the interest on the loan each month. That means your monthly payments are lower compared to a repayment mortgage, but the original loan amount (the capital) stays the same until the end of the term.
At the end of the mortgage term, you’re expected to repay the full amount – either from savings, investments, or by selling the property.

Why Do Homeowners Want to Extend?

There are a few reasons why people in the UK look to extend their interest-only mortgage term:

• Their original repayment plan hasn’t worked out as expected
• They’re not ready (or able) to repay the full loan
• They need more time to sell their property or make alternative arrangements
• They want to stay in their home longer, especially later in life

So, Can You Extend Your Interest-Only Mortgage?

Yes, in some cases, you can extend – but it’s not guaranteed. It depends heavily on:

• Your lender’s policy: Some lenders allow extensions, especially if you’re close to retirement or already retired. Others may require you to switch to a different mortgage type.
• Your repayment plan: Lenders will want to see how you intend to repay the loan eventually. If your plan is unclear or unrealistic, they may be reluctant.
• Your age and financial situation: If you’re older or on a reduced income, the lender might offer alternatives such as a retirement interest-only mortgage (RIO) or equity release.

Important: Lenders are under pressure from regulators like the Financial Conduct Authority (FCA) to ensure that borrowers can repay interest-only mortgages. So they’ll assess your situation quite closely.

What Are the Alternatives if You Can’t Extend?

If your lender says no to an extension, don’t panic. You still have options:

1. Switch to a Repayment Mortgage

This means your monthly payments will increase, as you’ll be paying back the capital as well – but it ensures the debt is cleared by the end of the term.

2. Consider a Retirement Interest-Only Mortgage (RIO)

This is designed for older borrowers and can last until you die or move into long-term care. You continue paying the interest each month, and the capital is repaid from the sale of the property later on.

3. Equity Release

If you’re 55 or over, equity release lets you access the money tied up in your home. It can help repay your current mortgage without needing to move. Always seek independent financial advice before taking this route.

4. Sell Your Property

For some, downsizing or moving somewhere more affordable is the only realistic option to clear the debt.

What Should You Do Next?

If you’re thinking about extending your interest-only mortgage, here’s what to do:

Speak to your lender early – Don’t wait until the last few months of your term.

Review your repayment plan – Make sure it’s realistic and up-to-date.

Get mortgage advice – An independent mortgage adviser can help you find the best solution based on your age, income, and goals.

Check eligibility for alternative products – Such as RIO mortgages or equity release.

Looking for help?
If you’re unsure where to begin, speak to a mortgage broker who specialises in later-life lending or interest-only deals

FAQs

Continue Reading