Interest-Only Remortgages

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Are you looking to remortgage your interest only mortgage?

Home Remortgages Interest-Only Remortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

Here we’ll look at what options you have when it comes to remortgaging or refinancing an interest-only mortgage, and why you should always speak to a broker to make sure you get the best deal for your circumstances.

Can you remortgage an interest-only mortgage?

Yes. There are mortgage lenders who will consider a straightforward remortgage on the same interest-only terms. In many cases, your existing lender will be prepared to offer you a new deal. But it’s important to check the rest of the market too, as there may be a better deal available by switching lenders.

It’s also worth looking at what repayment terms are on offer. Interest-only mortgages are usually taken out to make monthly payments more manageable, but if your property has gone up in value, your loan to value ratio will be lower and you may be able to get a lower rate.

Your personal circumstances may have also changed. If you have had a pay rise since taking out your mortgage or have paid off other commitments, a repayment mortgage (that will see your payments eat into the capital borrowed and not just the interest) may be affordable.

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How to get an interest-only remortgage

Your first step should be to make an enquiry with us so we can match you with a mortgage broker who specialises in interest-only remortgages. This will increase your chances of securing the best rate and deal, and their guidance will simplify the process.

The advisor we match you with will guide you through the following steps to full application:

  • Calculating your loan to value ratio and reviewing your interest-only repayment vehicle to make sure it is still on track to repay the capital amount owed
  • Optimising your credit reports in order to check for any inaccuracies or out of date information which could cause issues if not corrected before you apply for a remortgage
  • Finding the right remortgage lenders currently offering the most competitive rates
  • Gather all the necessary documentation needed for your remortgage application

Interest Only Remortgages Rates

Take a look at some example rates below for an idea of what to expect:

Lender Product Details
Frosted Rates Image

Looking for more rates and deals?

We can match you with a mortgage broker who can provide you with up-to-date bespoke rates and deals from across the entire market.

Last updated May 2024

Please note that the above rates were accurate at the time of writing, but are always subject to change at the lender’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

Can you release equity?

Yes. You could do this by extending your loan on either interest-only or repayment terms, providing you meet the providers’ eligibility criteria and can prove affordability.

Switching to a repayment mortgage will give you far more options in terms of lenders and products, so is something you should definitely look into as you may be able to get a more suitable deal.

To remortgage and release equity without increasing your payments too much, you might want to consider a part and part mortgage. This is a hybrid of an interest-only and repayment mortgage that gives you the best of both worlds.

Alternatives to remortgaging

If your interest-only mortgage is coming to the end of its term, you will soon be required to repay the capital borrowed. If your repayment vehicle is not sufficient to cover the balance, don’t despair – there are alternatives to remortgaging:

  • Equity release: If you’re over 55, you could take out an equity release product. This could allow you to pay off your mortgage and, possibly, release some of the equity in your home to spend on whatever you want. One of the good things about equity release is that you must take financial advice before going ahead so you will always make a fully informed decision.
  • Retirement Interest-Only Mortgage (RIO): Older borrowers may want to look into the possibility of a retirement interest-only (RIO) mortgage. A RIO mortgage is like any other interest-only mortgage but has no set term so the capital is repaid when you die or move into long term care.
  • Sell your property: Not everyone will want to do this, but if it has gone up considerably in value, you may be able to settle your mortgage and buy a smaller place to live using the equity.
  • Sell other property or assets: It’s worth taking an inventory of your assets (including shares and investments) – particularly if you have owned your home for 25 years. You might be able to clear your mortgage altogether or significantly reduce the amount of a remortgage and ensure your new monthly payments are manageable.
  • Extend your term: Depending on your circumstances, your current provider may agree to simply extend your term. If they do agree to this request, it is still worth comparing their deal against alternatives to make sure you don’t end up overpaying.

Refinancing an interest-only buy to let mortgage

When remortgaging an interest-only buy to let property, you will have more lenders available to you than when doing so with a residential mortgage.

Nonetheless, it’s worth looking at your options for switching to a repayment buy to let. Depending on the amount you need to borrow and the value of the property, you may be able to get a more affordable rate and start clearing your capital as well as servicing the interest.

Likewise, if you already have a repayment buy to let and are finding the repayments a squeeze, remortgaging to interest-only could help your cash flow situation.

Remortgaging to an interest-only mortgage

Interest-only could also be an option for residential homeowners looking for alternatives to relieve the burden of rising interest rates and higher monthly payments with a capital & repayment mortgage.

This is not a decision you should enter into lightly, so it’s advisable to draw up a full income and expenditure report and speak to an experienced remortgage specialist before making a decision.

Use our mortgage calculator below to get a comparison of what your mortgage payments will look like on capital and repayment versus interest-only.

Just click on the toggle button once you’ve inputted the amounts into the required fields to see the difference in monthly payments between each repayment method.

Mortgage Repayment Calculator

This calculator can tell you the monthly and overall cost of your mortgage, based on the loan amount, interest rate, and term length.

Enter the amount you're borrowing
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Enter the mortgage rate, 5.5% is a typical rate currently but this can vary
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Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
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Your Results:

The monthly repayments on a mortgage would be

The total amount paid at the end of your mortgage term would be

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Get matched with a remortgage specialist

Interest-only mortgages are often a great way to get onto the property ladder, but they are not always the best long-term solution. That’s why it’s always wise to assess your finances and consider all options when you come to remortgage.

Our broker matching service will pair you up with a remortgage specialist who has extensive experience helping people in your circumstances understand their options and make the right decision for them.

Get matched with your ideal remortgage specialist. Call now on 0808 189 2301 or enquire online to arrange a free, no-obligation chat.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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