Frequently asked questions
Use our frequently asked questions to find out what you need to know about Interest Only mortgages with Lloyds Bank International.
- 1. Jump to How does an interest only mortgage work?
- 2. Jump to What’s the difference between an interest only and a repayment mortgage?
- 3. Jump to What is a mortgage repayment plan?
- 4. Jump to What do I need to do before my mortgage term ends?
- 5. Jump to I can repay the interest only balance, do I need to do anything?
- 6. Jump to My plans have changed, what do I need to do?
- 7. Jump to I’m worried that my savings, or investments might not be enough to repay all of my mortgage.
- 8. Jump to I'm approaching, or already past, the end of my mortgage term. What do i do if i don't have any plans or i'm worried my plans won't be enough to repay what I owe?
- 9. Jump to I’m using the sale of my property to repay my outstanding mortgage balance. When should I look to sell the property?
- 10. Jump to Where can I find independent help and advice about my mortgage?
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1.
How does an interest only mortgage work?
When you have an interest only mortgage, your monthly payments only pay the interest charged on the amount you borrowed. This means the interest only balance doesn’t reduce and you’ll need to have separate plans to pay this amount by the time your mortgage ends.
For example, if you borrowed £125,000 with an interest rate of 3% over 25 years, we’ll set your monthly mortgage payments at £313. By the end of your mortgage, you’ll still need to repay the £125,000 you originally borrowed.
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2.
What’s the difference between an interest only and a repayment mortgage?
Interest Only Mortgage Repayment Mortgage Your monthly payments will only repay the interest charged on the amount you borrowed. This means that you won’t be paying off the amount originally borrowed. Your monthly payments will go towards reducing the amount you borrowed and the interest charged on this amount. This means that each month you are paying off a small part of what you borrowed. You’ll need a separate plan in place to repay your interest only balance by the end of your mortgage. Your monthly payments are set to repay everything you owe by the end of your mortgage.
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Your mortgage can also be a combination of repayment and interest only. This way, some of your monthly payments will also go towards reducing the balance. -
3.
What is a mortgage repayment plan?
By the end of the mortgage, you’ll need to repay the full interest only balance. There are many different plans you can put in place to repay the balance and we’ve listed some of these below. When considering your options, you should make sure that your plan will provide enough to repay the balance and importantly, be available when you need to make the final payment.
Back to topRepayment plans Things to consider Switch to a repayment mortgage Switching all, or some of your mortgage to a repayment mortgage means you’ll start paying off the amount you borrowed, as well as the interest. If you switch your whole mortgage to repayment, we’ll set your monthly payment to repay everything you owe by the end of your mortgage term. If you switch part of your mortgage, you’ll reduce the amount you’ll need to repay by the end.
To switch to repayment, please contact us. We’ll look at your income and how much you spend each month to understand if this is an affordable option for you.Overpayments When you make overpayments to your mortgage, you’ll reduce the amount you owe and pay less interest. The sooner you start making overpayments, the sooner you’ll start reducing the interest only balance.
Early repayment charges may apply to your mortgage. Please check if you’re unsure if these apply.Sale of your second property House prices change regularly and may fall as well as rise. It’s important to be realistic about the value of your property and to allow enough time to complete the sale before your mortgage ends. Savings You should check your statements when you receive them to make sure you’ll have enough and can get access to the money when you need it. Investments The value of any investment can change over time, falling as well as rising. You should check your statements when you receive them to make sure you’ll have enough and can get access to the money when you need it. Pension Using the lump-sum from your pension policy to repay some, or all, of your mortgage at the end of the term will impact the income you’ll have when you retire. If you’re unsure how this will affect your retirement income, you should speak to an independent financial advisor.
Sale of a business or other assets The value of any business or assets you plan to sell can go down as well as up. If you don’t get the amount you expect when you sell, it may affect your ability to repay. It may take a while to sell your assets so you’ll need to plan for this in good time before your mortgage term ends. Bonus Changes in any bonus you expect to receive may affect your ability to repay your mortgage. -
4.
What do I need to do before my mortgage term ends?
We’ll write to you during the last year of your mortgage, with details of how much your interest only balance is and when it’s due to be repaid.
You should check your repayment plan is on track to repay everything you owe and also that you can get access to the money when you need it. If you’re planning to sell a property, business or other assets, you should allow enough time for the sale to complete and the money to become available.
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5.
I can repay the interest only balance, do I need to do anything?
If you're confident your plans are on track to repay everything you owe, let us know. You can discuss your plans by calling us on 01624 657500.
Our lines are open 9am to 5pm Monday - Friday UK time.
Calls may be monitored and recorded. Call costs may vary depending on your service provider.
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6.
My plans have changed, what do I need to do?
If your plans change, but you’re still happy you can repay everything you owe that’s great. Please let us know and keep us updated, you can discuss your plans by calling us on 01624 657500.
Calls may be monitored and recorded. Call costs may vary depending on your service provider.
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7.
I’m worried that my savings, or investments might not be enough to repay all of my mortgage.
It’s important to be realistic about the value of your savings, or investments. You can check your savings, and investments statements to make sure you have enough to repay your balance when your mortgage term ends. It’s best to talk to us as soon as you can if you are worried your plans might not be enough to repay your mortgage.
You can call us on 01624 657500. Our lines are open 9am to 5pm Monday - Friday UK time.
Calls may be monitored and recorded. Call costs may vary depending on your service provider.
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8.
I'm approaching, or already past, the end of my mortgage term. What do i do if i don't have any plans or i'm worried my plans won't be enough to repay what I owe?
If you think you may struggle to repay your full interest-only balance, let us know as soon as possible. You could be a few years from the end of your mortgage term, maybe just a few months, or even already past the end of your term. However long you have left, the sooner you get in touch, the more solutions you may have.
Every day we help customers make plans. We can help you decide what works best for you. Check what information is available to you online or you can call us on 01624 657500. Our lines are open 9am to 5pm Monday - Friday UK time.
Calls may be monitored and recorded. Call costs may vary depending on your service provider.
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9.
I’m using the sale of my property to repay my outstanding mortgage balance. When should I look to sell the property?
If you are using the sale of a property to repay your mortgage, you should give yourself enough time to market and sell the property before the term ends. You may need at least 12 months to market your property to allow time for the sale to go through.
House prices change regularly and may fall as well as rise. It’s important to be realistic about the value of your property, make sure you are prepared and understand what your next steps will be after you have sold your property.
You can call us on 01624 657500. Our lines are open 9am to 5pm Monday - Friday UK time.
Calls may be monitored and recorded. Call costs may vary depending on your service provider.
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10.
Where can I find independent help and advice about my mortgage?
We’re always here to talk to you about your finances, but there are other people you can talk to for independent help and advice. Here are some services that offer free, impartial support:
- Jersey:
Citizens Advice provide advice on debt
The Government website also has a link for debit advice/information - Guernsey:
Citizens Advice provide advice on debt - Isle of Man:
Information on debt counselling on the Government website through the Office of Fair Trading
If you have any questions about your mortgage which aren’t covered above, please call us 01624 657500. Our lines are open 9am to 5pm Monday - Friday UK time.
Calls may be monitored and recorded. Call costs may vary depending on your service provider.
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The Bank conducts its business in accordance with local legal and regulatory requirements, including anti-money laundering requirements which require the Bank to disclose information that would otherwise be confidential in circumstances where the Bank suspects its customer is benefiting or engaging in criminal activity including tax fraud.
Lending is at the Bank’s discretion and you must be 18 or over to apply. Security may be required.