Get Your Best Mortgage Deal, Completely Fee-Free!
In this guide:
    Add a header to begin generating the table of contents

    If you have an interest-only mortgage, it might be that you’re interested in extending it. Especially if you’re coming to the end of the mortgage term and are worried about repaying the final lump sum, this could be one avenue that seems logical to you. However, the possibility of extending your interest-only mortgage hinges on lender-specific criteria.

    This guide delves into the nuances of interest-only mortgages, especially focusing on term extensions.

    Can I extend my interest only mortgage term?

    Yes, extending the term of an interest-only mortgage is indeed possible, though it’s subject to your lender’s discretion. Your ability to extend depends on meeting your lender’s specific requirements, including financial criteria. The Financial Conduct Authority (FCA) advises homeowners to initiate discussions with either their mortgage adviser or directly with their mortgage lender early to explore available options. Prompt communication with your broker or lender is crucial for evaluating your eligibility for a term extension.

    Here’s a brief list of eligibility criteria for an extension:

    Eligibility Criteria for Extending an Interest-Only Mortgage Term:

    • Loan-to-Value (LTV) Ratios: Higher equity in your property improves your application, as it reduces risk for the lender.
    • Affordability and Final Repayment: Lenders assess your income and how you plan to repay the loan at the end of the new term, considering sources like property sales, pensions, savings, or other assets.
    • Credit History: A good credit score favours mortgage approval; a bad credit history may hinder it.
    • Age: While age limits vary, typically lenders set a maximum age of 75 to 85 for extensions, with flexibility depending on other application strengths.

    Meeting these criteria is crucial for securing an extension on the term og your interest-only mortgage.

    What is the longest term for interest-only mortgage?

    Typically, interest-only mortgage terms range from 5 to 25 years. Yet, based on the borrower’s specific circumstances, mortgage lenders may offer terms extending up to 40 years. The maximum term varies by lender and is contingent upon the borrower’s ability to meet the lender’s criteria, including the plan for repaying the loan at term’s end. These mortgages can also be obtained on a shorter basis. Provided you could prove your ability to repay the capital after a shorter time frame, perhaps at the end of 2 years, a mortgage provider might approve your application. This flexibility allows borrowers to tailor the mortgage term to their financial situation and goals.

    Is extending a mortgage term the same as remortgaging?

    Extending the term of your mortgage isn’t quite the same as remortgaging. Extending the term gives you more time to repay the loan, while remortgaging switches your deal, often for a lower interest rate or to borrow more against your home’s equity. Remortgaging can lead to lower monthly payments and potentially more equity by the end of the mortgage, making it a financially advantageous option in some cases.

    Learn more with our Guide to an Interest-Only Remortgage

    Ready to Explore Your Mortgage Options?
    Explore the possiblilty of extending your interest-only mortgage. Let us guide you to the perfect mortgage terms fit for your financial future. Reach out for FREE personalised advice from our expert mortgage advisors at YesCanDo Money.

    Considerations when Extending Your Interest Only Mortgage Term

    Several circumstances might make extending your interest-only mortgage’s term a wise decision, while in other situations, opting for a different repayment method could be more advantageous.

    extending interest only mortgage

    Extending term on your mortgage might be beneficial if you have a solid plan for repaying your mortgage. For instance, you might find yourself in a better position to settle your mortgage at the end of an extended term for reasons such as:

    • An expected increase in your income over the period,
    • The potential sale of another property you own, including possibly the one under the interest-only mortgage,
    • A decrease in your other financial commitments, allows you to allocate more funds towards repaying your mortgage.

    However, it’s crucial to weigh the potential drawbacks of extending your mortgage term. The main cons include:

    • Increased overall cost of your mortgage due to accumulating more interest over the extended period. While the short-term financial relief might seem appealing, the long-term costs could outweigh these benefits.
    • Slower equity growth in your property. Interest-only mortgages rely on the appreciation of property value for equity growth. Switching a mortgage to a repayment, on the other hand, would mean you’re actively paying down the loan’s principal, thereby building equity more rapidly.

    Should I Extend My Interest-Only Mortgage Term?

    Deciding whether to extend the term of your interest-only mortgage hinges on a careful assessment of your financial situation and long-term goals. An extension might offer immediate relief by reducing monthly payments, but it’s essential to consider the broader financial implications, including the total interest paid over the extended term.

    The True Cost of Extending My Interest-Only Mortgage Term

    When you extend the term of your interest-only mortgage, the total interest you end up paying over the loan’s lifetime can increase significantly.

    For example, suppose you have a 25-year interest-only mortgage with a loan amount of £200,000 at a 4% interest rate. Initially, the total interest paid would amount to approximately £200,000. However, extending the mortgage by an additional 10 years at the same interest rate would elevate the total interest paid to roughly £280,000. This scenario highlights the critical need to consider the long-term financial impacts thoroughly before deciding to extend the term on your mortgage.

    Visualisation Graph: Impact of Extending Interest-Only Mortgage Terms

    Explore the financial implications of extending an interest-only mortgage from 25 to 35 years through our stacked bar chart. Each bar, representing a year, layers the fixed £200,000 capital beneath the accruing interest, showcasing the total payment’s growth. This visual aids in grasping the increased financial commitment required over time, essential for homeowners weighing the decision of a term extension.

    Learn more about the true cost of extending your mortgage term

    How to Extend an Interest-Only Mortgage Term

    If you’re considering the path to prolonging the term of your interest-only mortgage, embarking on this journey requires a few strategic steps to ensure your application stands on solid ground.

    Step 1: Analyse Your Mortgage and Financial Health

    Kick things off by taking a close look at your mortgage’s remaining balance, the interest rate you’re currently juggling, and the looming date for full repayment. Assess whether your initial repayment plan is still feasible. If it appears you might fall short, evaluate how much of the loan you could realistically settle by the term’s end. It’s worth considering if partial repayment is an option should a full settlement be out of reach.

    Step 2: Conduct a Credit Check

    Now’s a prime moment to get a picture of your credit standing. A comprehensive credit check will unveil the robustness of your extension plea. While adverse credit entries don’t always spell doom for extension bids with lenders, being in the know about your credit health is beneficial. This insight allows you to address inaccuracies or, at the very least, understand your position as you forge ahead with your application.

    Get a FREE credit report with Checkmyfile: Boost Your Credit Score

    Step 3: Consult a Mortgage Broker

    Getting expert help from a fee-free mortgage broker for your interest-only mortgage is highly recommended. Such specialists bring a wealth of market savvy and insights into lender expectations regarding extension requests. They’re well-equipped to gauge if your existing lender is likely to entertain an extension plea or advise on bolstering your application’s appeal. Their expertise might also unlock avenues for securing an extension at a more favourable interest rate.

    Introducing YesCanDo Money: Experts are Interest-Only Mortgages

    If you are currently on an interest-only mortgage and need mortgage advice related to your mortgage terms, contact us for a no-obligation chat. A mortgage advisor will explore your options on interest only mortgages with you if you want to extend your mortgage or switch to a new lender with a more affordable repayment plan and reduce your monthly repayments.

    If you do decide to move onto a new mortgage loan, we will search the market with the help of our mortgage broker tools, searching for the best mortgage products for your financial needs. We will search through 95+ lenders and consider ones more likely to offer you mortgage approval. We’ll give you all the help and support you need throughout the mortgage application process.

    Ready for Personalised Mortgage Advice?
    Reach out for 100% FREE expert mortgage advice. Our team is here to guide you to the mortgage that's just right for your financial needs. Contact us today!

    Term Extensions for Interest-Only Mortgages: Comparing Mortgage Lenders

    When it comes to extending the term of your interest-only mortgage, the decision firmly rests in the hands of your lender. Not all lenders offer interest only mortgages and each has its own set of policies regarding term extensions—some might be open to maximising the extension period, while others might offer a more conservative extension timeframe, or perhaps might not entertain the idea of an extension at all.

    Take Penrith Building Society, for instance. They’re recognised for their flexible approach towards interest-only mortgages, offering terms up to 35 years without setting a cap on the borrower’s age at the term’s conclusion. If your mortgage is with Penrith, you’re likely in a good position to negotiate your term up to this generous limit.

    Other lenders also present interesting options for those considering interest-only mortgages, each with their unique terms and conditions:

    • Newbury Building Society: Welcomes terms up to 35 years, accommodating borrowers up to 90 years of age by the term’s end.
    • Live More: Stands out with a remarkable maximum term of 50 years, imposing no age limit for borrowers at the term’s conclusion.
    • The Loughborough Building Society: Offers terms up to 35 years, also without a maximum age limit for the term’s end.
    • Together: Provides flexibility with terms reaching up to 40 years and considers borrowers up to 85 years old at the term’s closure.

    Navigating the landscape of interest-only mortgage extensions requires a clear understanding of each lender’s guidelines and an assessment of how these align with your long-term financial planning.

    Alternative Options if You Can’t Extend Your Current Interest Only Mortgage

    When an extension of your interest-only mortgage isn’t feasible or aligns poorly with your financial strategy, several alternative paths are available. It’s crucial to explore each option thoroughly to find the best solution for your financial health and future security.

    Switch Lenders

    Remortgaging to another interest-only mortgage with a different mortgage lender might be a suitable choice.

    • You will need to meet the new lender’s eligibility criteria.
    • Your credit history and repayment track record will be assessed.
    • There’s a potential for an application decline if there’s bad credit or inconsistent repayment history.

    Pay off in Cash

    Utilising available funds to clear your mortgage debt is a straightforward approach.

    • Use savings to pay the outstanding balance.
    • Your friends or family might assist with loans or gifts.
    • Over 55s can possibly use a tax-free lump sum from pensions for repayment.

    Sell the Property

    Selling your home to downsize can provide significant equity to settle your mortgage.

    • The sale proceeds can be used to clear the mortgage.
    • Moving to a less expensive property might free up additional cash.
    • Consideration of moving costs and potential lifestyle changes is essential.

    Switch to a Repayment Mortgage

    Converting to a capital repayment mortgage allows you to chip away at both the interest and capital.

    • Most mortgage providers are open to converting interest-only mortgages to repayment terms.
    • This switch ensures a gradual reduction of the mortgage principal.
    • The affordability of the new monthly repayments must be evaluated.

    Switch to a Retirement Interest-Only Mortgage

    For retirees, a retirement interest-only mortgage or lifetime mortgage may offer a tailored solution.

    • Requires being able to meet the monthly interest payments.
    • There’s no fixed end date for repayment; the loan is repaid upon significant life events.
    • Suitable for older borrowers seeking to maintain their home ownership without the pressure of an impending lump sum repayment.

    Remortgage to a Lower Rate and Overpay

    Securing a lower interest rate through remortgaging can economise your payments.

    • Lower mortgage payments enable overpayments, reducing the overall loan balance.
    • Savings from reduced interest can be accumulated for a lump sum overpayment.
    • Evaluating new mortgage deals for better interest rates is key.

    Discover The Best Interest-only Mortgage Rates Here

    Equity Release

    Releasing equity from your home without selling is an option for those aged over 55 years old.

    • Lifetime mortgages or equity release schemes allow you to tap into your home’s value.
    • No requirement for monthly repayments; the loan is settled posthumously or upon moving into care.
    • Allows you to remain in your home while accessing needed funds.

    Each alternative carries its own set of advantages, considerations, and potential impact on your financial future. Careful evaluation, possibly with the assistance of a financial advisor, will help determine the most beneficial course of action tailored to your circumstances and goals.

    Anthor good alternative could be getting a hyprid of interest-only and capital repayment called a Part and Part Mortgage.

    For detailed guidance on interest-only mortgages and exploring term extensions, reach out to us today. Our friendly and experienced mortgage team is ready for advice and will make sure you are paying the lowest possible monthly payments.

    Ready to Explore Your Mortgage Options?
    Explore the possiblilty of extending your interest-only mortgage. Let us guide you to the perfect mortgage terms fit for your financial future. Reach out for FREE personalised advice from our expert mortgage advisors at YesCanDo Money.

    Frequently Asked Questions

    Yes, switching from an interest-only to a repayment mortgage is possible, allowing you to pay both the interest and capital. Consult with your broker or mortgage lender for help switching mortgage.

    Eligibility for a mortgage on an interest-only basis includes a higher income, substantial deposit or equity, a credible repayment plan for the loan's capital, and a good credit history.

    Repay the capital at the term's end through savings, selling the property, downsizing, or using other assets. Consider remortgaging or a new loan well before the term ends.

    Extending the term on your mortgage in retirement is possible with some lenders, despite age limits. Success depends on debt levels and proving the ability to continue payments.

    Share this post:
    Steve Roberts (MAQ )
    Steve Roberts (MAQ )

    Stephen Roberts the founder of YesCanDo Money, one of the UK's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of first-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

    Contact Us

    Other Interest-Only Mortgage Guides

    Extending Your Interest Only Mortgage Term

    If you have an interest-only mortgage, it might be that you’re interested in extending it. Especially if you’re coming to the end of the mortgage ...
    Read More →

    Exploring Interest-Only Mortgages

    Unfortunately, you have to pay interest on every type of mortgage. It’s the price you pay for borrowing the funds you need to secure your ...
    Read More →

    Discover The Best Interest-only Mortgage Rates

    As with any financial decision, when selecting an interest-only mortgage rate it’s crucial to take an overall view of your financial situation before settling on ...
    Read More →

    Comprehensive Guide to an Interest-Only Remortgage

    If your existing interest-only mortgage deal is approaching its end, it’s crucial to explore remortgaging options before transitioning to your lender’s standard variable rate (SVR). ...
    Read More →

    Discover a Part and Part Mortgage: Repayment and Interest-Only

    Ever wondered about part and part mortgages? This hybrid option merges the advantages of both repayment and interest-only mortgages, providing homeowners with a beneficial mix. ...
    Read More →

    Can I Switch to Interest Only Mortgage?

    Trying to cut down expenses by lowering your monthly mortgage payments? Or perhaps you’ve got a strategy to tackle your mortgage balance further down the ...
    Read More →
    Scroll to Top
    This website uses cookies to improve your experience. If you continue we’ll assume you’re happy. See our privacy policy for more information.