It\u2019s possible to transfer from a repayment mortgage to an interest-only agreement and there are many circumstances where switching could be a sensible option. However, there are also a number of things you should consider before making the change.\r\n\r\nOur guide to switching from a repayment to an interest-only mortgage highlights the key things to think about if you\u2019re considering a change as well as the eligibility criteria you\u2019ll need to meet and more.\r\n\r\nThe following topics are covered below\u2026\r\n<ul>\r\n \t<li><a href="#switching">Switching to an interest-only mortgage<\/a><\/li>\r\n \t<li><a href="#eligible">Am I eligible for an interest-only mortgage?<\/a><\/li>\r\n \t<li><a href="#borrow">How much will I be able to borrow?<\/a><\/li>\r\n \t<li><a href="#vs">Interest-only vs repayment mortgages<\/a><\/li>\r\n \t<li><a href="#credit">Can I switch if I have credit problems?<\/a><\/li>\r\n \t<li><a href="#expert">Speak to an expert<\/a><\/li>\r\n \t<li><a href="#faqs">FAQs<\/a><\/li>\r\n<\/ul>\r\n[feefo-banner]\r\n<h2 id="switching">Switching to an interest-only mortgage<\/h2>\r\nMany mortgage lenders will consider the possibility of letting you switch from a repayment mortgage to interest-only if you want\/need to. But only if you meet their criteria for an interest-only mortgage and have a repayment plan to settle the debt at the end of the term.\r\n\r\nBefore they will let you switch, your lender will carry out checks around\u2026<b><\/b>\r\n<ul>\r\n \t<li><b>Your repayment vehicle: <\/b>They\u2019ll want to know whether it will raise enough to pay off the debt and that the funds are coming from an acceptable source<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><b>Your credit history: <\/b>They will likely re-assess this to make sure your creditworthiness hasn\u2019t changed since you took out your original mortgage<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><b>Your income: <\/b>Again, they will want to be sure nothing has changed since you took out your original mortgage and be confident that affordability won\u2019t be an issue<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><b>Equity: <\/b>The equity you hold in your property can serve as a deposit for your new interest-only mortgage. You\u2019ll need to hold enough to meet the lender\u2019s minimum loan-to-value (LTV) ratio for an interest-only mortgage<\/li>\r\n<\/ul>\r\n<h2 id="eligible">Am I eligible for an interest-only mortgage?<\/h2>\r\nThe most important thing you need to demonstrate when switching from a repayment mortgage to an interest-only arrangement is a sound and reliable plan for paying off the whole loan at the end of the term.\r\n\r\nMany lenders are happy to lend on an interest-only or part and part basis, but they will want to know that you have a practical<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/interest-only-mortgages\/interest-only-repayment-vehicles\/"> repayment strategy in place<\/a>.\r\n\r\nLenders have different criteria as to what they will accept as a repayment strategy. Some might look for regular repayments to be made into a savings or investment account, while others can consider other assets, such as buy-to-let investments. Some lenders can even accept the sale of the property at the end of the term if you plan to downsize or move into rented accommodation.\r\n<h3>Can I change my mortgage at any time?<\/h3>\r\nDepending on your circumstances, it should be possible to<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/remortgages\/interest-only-remortgage\/"> remortgage onto interest only<\/a>, but if you are still in the<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/mortgage-application\/mortgage-no-early-repayment-charges\/"> Early Repayment Charge<\/a> period on your existing mortgage, there may be fees to pay to change your product.\r\n\r\nBefore making a decision, take a look at your mortgage terms and conditions to see if this might apply to you, or if there are any other hidden charges you could incur by switching.\r\n<h3>Switching to an interest-only mortgage temporarily<\/h3>\r\nIf you\u2019re experiencing a period of financial difficulty, some lenders will consider a temporary switch to an interest-only mortgage.\r\n\r\nWe work with specialist advisors who will be able to discuss the most appropriate option for your circumstances.\r\n\r\nIf your plans involve switching to an interest-only mortgage on a short term basis, get in touch and the advisors we work with will help you find the best lender for this.\r\n<h2 id="borrow">How much will I be able to borrow?<\/h2>\r\nLenders base affordability on your level of income and your level of outgoings. Some providers will cap what they\u2019re willing to lend based on 4x your income, while others will stretch to 5x, and a minority 6x, under the right circumstances.\r\n\r\nDifferent lenders also consider additional sources of income, such as<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/income-types\/using-commission-and-bonus-income-for-mortgages\/"> bonuses or commission<\/a> in different ways. Some lenders are able to consider 100% of bonus, while others may take 50% into consideration and some lenders may disregard bonus payments altogether.\r\n\r\n[box type="shadow"]\r\n\r\n<b>Hypothetical Example:<\/b>\r\n\r\nSay your basic salary is \u00a330,000, but you earn an annual bonus of \u00a320,000. Here\u2019s what different lenders might be able to lend to you:\r\n<table class="wp-block-table">\r\n<tbody>\r\n<tr>\r\n<td>Lender 1 - 50% bonus + 4x income<\/td>\r\n<td>\u00a320k x 50% = \u00a310,000<\/td>\r\n<td>\u00a330k + \u00a310k = \u00a340,000<\/td>\r\n<td>\u00a340k x 4 = \u00a3160,000 max loan<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Lender 2 - 100% bonus + 5x income<\/td>\r\n<td>20k x 100% = \u00a320,000<\/td>\r\n<td>\u00a330k + \u00a320k = \u00a350,000<\/td>\r\n<td>\u00a350k x 5 = \u00a3250,000 max loan<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n[\/box]\r\n\r\nIn this example, this difference between the amount the two lenders will lend is \u00a390,000, not because your circumstances have changed but because of the different ways they calculate your affordability.\r\n\r\nYou can read our guide to<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/income-types\/using-commission-and-bonus-income-for-mortgages\/"> mortgages based on bonuses and commission<\/a> income for more information, but speaking with one of the expert brokers we work with will ensure you get the best possible outcome for the amount you want to borrow and the best available rates too.\r\n<h2 id="vs">Interest-only vs. repayment mortgages<\/h2>\r\nWith a repayment mortgage, your monthly payments are used to pay the interest on the mortgage and also to reduce the balance of the loan.\r\n\r\nThe repayment model is designed so that, providing you make each monthly payment, the debt will be repaid in full by the end of the mortgage term.\r\n<h3>How is an interest-only mortgage different?<\/h3>\r\nOn an interest-only mortgage, you only pay the interest on the amount borrowed, leaving the entire mortgage amount to be repaid in one go at the end of the mortgage term.\r\n\r\nA repayment mortgage provides the only certain way of ensuring the debt is fully repaid and, for this reason, lenders tend to favour these loan arrangements.\r\n\r\nHowever, there are still plenty of options for<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/interest-only-mortgages\/"> interest-only<\/a> or<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/interest-only-mortgages\/part-and-part-mortgages\/"> part-and-part mortgages<\/a>, where a portion of the loan is on a repayment basis and the remainder is interest-only.\r\n\r\nBy switching to an interest-only mortgage you could improve your monthly cash flow position. This is because, generally, the monthly payments on an interest-only mortgage will be lower than on a repayment mortgage as none of the payment is being used to pay off the balance.\r\n\r\nThis could help you to make investments that could potentially provide a better return than you would otherwise achieve, or it could help you to manage a difficult financial period.\r\n<h3>Do I need to have equity in my property to switch?<\/h3>\r\nOne important factor on whether you can change your mortgage to interest-only is the amount of equity that you have in your property.\r\n\r\nWhile there are many repayment mortgages that are available with up to 95% loan to value (LTV), lenders tend to be more conservative in lending on an interest-only basis.\r\n\r\nHowever, there are still options for moving your mortgage to interest-only if you have only a small amount of equity in your property.\r\n\r\nSome lenders also provide the option to take a loan on a part-and-part basis in which some of the loan balance is paid on an interest-only basis up to the lender\u2019s maximum interest-only LTV and the remainder of the loan is paid on a repayment basis.\r\n<h2 id="credit">Can I switch to an interest only mortgage if I have credit problems?<\/h2>\r\nThe answer is often yes - switching to an interest-only mortgage is possible, depending on what type of credit problems you have had and how recently you have had them.\r\n\r\nWhile some providers (high street ones, in particular) might turn you away outright, specialist bad credit providers have the flexibility to take a broader view of your mortgage application.\r\n\r\nIn general, bad credit lenders will want to know what the issue is, how long ago it was, how much it was for and whether it has been repaid. Some lenders will also ask for an explanation about previous credit problems to help them to understand whether these were one-off events or are likely to happen again.\r\n\r\nFor more information on<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bad-credit-mortgages\/how-to-get-a-mortgage-with-bad-credit\/"> how to get a mortgage with bad credit, <\/a>\u00a0we cover each credit issue and how to get a mortgage approved extensively within our bad credit page.\r\n<h2>Can I afford to switch to interest only?<\/h2>\r\nMonthly payments on an interest-only mortgage will generally be lower than payments on a repayment mortgage but most lenders now calculate affordability on interest-only loans as if it were a repayment mortgage.\r\n\r\nThis means that changing your mortgage to interest-only is not a way of stretching how much you can borrow.\r\n\r\nTo find out how much you will be able to borrow when you\u2019re changing from a repayment to an interest-only mortgage, your best bet is to talk to a whole-of-market mortgage broker, like the ones we work with.\r\n\r\nEvery lender has their own method of calculating how much you can afford to borrow, often using sophisticated affordability models. This means a lot of choice and so it\u2019s important to choose the right lender for your circumstances as this can make a big difference to how much you are able to borrow, as well as how much you could save on your monthly mortgage payments.\r\n<h2 id="expert">Speak to an expert<\/h2>\r\nIf you\u2019re thinking of switching mortgage to interest-only, the best place to start is by speaking to a mortgage broker whose specialty is helping customers change their mortgage type. There are brokers in our network who help people change their mortgage type to interest-only every day, and they have a strong track record helping them get the best rates.\r\n\r\nConsulting with an advisor who has the right knowledge and expertise could help you save time, money and potential disappointment when changing your mortgage type.\r\n\r\nCall 0808 189 2301 or<a href="https:\/\/enquiries.onlinemortgageadvisor.co.uk\/match-me-with-an-interest-only-specialist\/"> make an enquiry<\/a> and our free broker-matching service will pair you up with the mortgage specialist who\u2019s best positioned to help you switch.\r\n<h2 id="faqs">FAQs<\/h2>\r\n<h3>Can I switch my mortgage if I have recently changed jobs?<\/h3>\r\nYes, this could be possible. Some lenders may ask for a minimum of 12 months' employment history, but many lenders may consider an application from borrowers who are still in their probationary period, they may also consider those who are looking to apply for a<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/income-types\/getting-a-mortgage-with-a-new-job\/"> mortgage with a new job<\/a>.\r\n\r\nSome lenders may even consider a future contract within 3 months of the start date of a new job.\r\n<h3>Can I change to interest-only if I recently became self-employed?<\/h3>\r\nTraditionally, lenders have asked for 3 years\u2019 worth of business accounts. However, there are now many lenders that will make a decision based on just 1 years\u2019 accounts for a<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/self-employed-mortgages\/"> self-employed mortgage<\/a>.\r\n\r\nThere are even a few lenders who will consider less trading history than this if you are close to your year-end, or if you were in the same line of work as an employee before you became self-employed.\r\n\r\nDifferent lenders also have different ways of assessing income. Many will use salary and dividends for company owners, but some can also consider profit retained within the business and this could make a significant difference to the outcome.\r\n<h3>Can I change my mortgage to interest-only if I am a contractor?<\/h3>\r\nYes, this may be an option as lenders have really improved the way they deal with<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/income-types\/contractor-mortgages\/"> mortgage applications from contractors<\/a> and, depending on your circumstances, there could be an option for you.\r\n\r\nDifferent lenders have different requirements \u2013 some may ask for a minimum period working in the same profession, whereas others can consider new contractors if they have previously been employed in the same industry in which they are contracting.\r\n<h3>Is switching to an interest-only mortgage while on maternity leave possible?<\/h3>\r\nSome lenders may allow this, as long as you can prove you will have the means to keep up with the monthly interest payments while on maternity leave. You will also need to have a viable repayment vehicle in place to settle the loan at the end of the mortgage term.\r\n\r\nMaternity leave can impact your affordability, so some lenders may want to see evidence that you will be returning to work after a set period and will be receiving enough capital while off work to cover the monthly payments.\r\n\r\nu on the best options, and they will introduce you to the right lender for your needs and circumstances.