What Happens When Your Interest-Only Mortgage Ends?
If your interest-only mortgage is coming to an end and you’re unsure how to repay it, you may be worried about what happens next.
This guide explains what happens when your interest-only mortgage ends, what to discuss with your lender and the ways you could repay the outstanding balance.
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At a glance
When your interest-only mortgage ends, you must repay the outstanding loan in full. Your monthly payments have covered the interest, so the capital will still be due unless you have paid some of it off separately.
If your savings or investments will not cover the balance, selling your home is not necessarily your only option. You may be able to change your mortgage, extend the term or consider borrowing designed for later life.
What happens when your interest-only mortgage ends?
When your interest-only mortgage term ends, you must repay the outstanding loan, known as the capital. For example, if you borrowed £100,000 and have only paid the interest, you will still need to repay £100,000.
This is different from a fixed-rate deal ending. Your fixed rate applies for a set period within your mortgage term. When that deal finishes, your interest rate may change, but the capital is not normally due until the mortgage term ends.
Your lender should contact you before then to ask how you plan to repay. They may ask whether your endowment, savings or investments are on track to cover the balance.
As long as you meet the terms of your mortgage agreement, your lender cannot demand early repayment simply because your repayment plan may fall short. However, missed payments or other breaches could lead to action before the term ends.
If you cannot repay the full amount, speak to your lender as soon as possible. Explain how much you can pay and when, so they can discuss your options. Continuing to pay the interest does not automatically give you more time to repay the loan.
What your lender must do
Your lender must treat you fairly and offer appropriate support if you are worried about repaying your mortgage. The Financial Conduct Authority’s (FCA) Consumer Duty sets standards for this support. Your lender should discuss realistic options with you, with repossession treated as a last resort.
However, this does not guarantee a mortgage extension or mean your debt will be written off. Any arrangement will depend on your circumstances and ability to repay.
You are not alone in facing this concern. UK Finance figures published in June 2026 show that 445,000 interest-only and 156,000 part-and-part homeowner mortgages remained outstanding at the end of 2025.
Earlier FCA research published in 2023 found that 36% of borrowers thought they might not have enough money to repay their loan. While this is not a current estimate, it highlights why checking your repayment plan early matters.
Your options if you can’t repay
Your options for paying off an interest-only mortgage depend on how much you owe, your finances and whether you want to stay in your home.
Switch to a repayment or part-and-part mortgage
A repayment mortgage lets you pay off some of the loan each month alongside the interest.
Benefits: If you keep up the payments, the mortgage will be cleared by the agreed end date.
Things to consider: Monthly payments will be higher. A part-and-part mortgage lets you repay some borrowing gradually while keeping the rest interest-only. You will still need a plan to clear the interest-only balance.
Extend the mortgage term
Your lender may agree to give you more time to repay.
Benefits: Combining an extension with a repayment mortgage can spread the loan over more years, making monthly payments more manageable.
Things to consider: An extension is not guaranteed. Age and retirement income may affect the decision. Extending an interest-only term alone delays repayment without reducing the balance, and usually means paying more interest overall.
Remortgage with another lender
You could take out a new mortgage to repay your existing lender.
Benefits: Another lender may offer a term or repayment arrangement that better suits your circumstances.
Things to consider: Approval depends on checks covering income, age, credit history and your property. Interest-only borrowing normally requires an acceptable repayment plan. Compare fees and total costs.
Retirement interest-only (RIO) mortgage
A retirement interest-only mortgage lets you pay monthly interest, with the capital usually repaid when the last borrower dies or moves permanently into long-term care.
Benefits: There is usually no fixed deadline for repaying the capital.
Things to consider: You must show the payments are affordable in retirement. Your home may be repossessed if you do not keep up repayments.
Equity release: a lifetime mortgage
Equity release can replace your existing mortgage with borrowing secured against your home.
Benefits: A roll-up plan requires no monthly repayments and allows you to remain the homeowner, subject to the plan’s conditions.
Things to consider: Unpaid interest increases the debt and reduces your remaining equity. The amount available may not cover your mortgage. Regulated equity release advice is required.
Sell or downsize
Selling your home could provide the money to repay the mortgage.
Benefits: Moving to a cheaper property may allow you to clear the debt and live mortgage-free.
Things to consider: The sale proceeds must cover your mortgage, moving costs and your next home or alternative accommodation. Check property prices before deciding.
Use savings, pensions or other money
Savings, investments, an endowment payout, an inheritance already received or family help could cover some or all of the balance.
Benefits: Reducing the debt could make the remaining amount easier to repay.
Things to consider: Keep money for emergencies. Do not rely on an inheritance arriving on time. Get financial advice before using pensions or investments, as withdrawals may create tax bills and reduce retirement income.
Using equity release to pay off an interest-only mortgage
You may be able to repay your interest-only mortgage with a lifetime mortgage secured against your home. Your existing mortgage must be cleared when the plan starts. If you cannot borrow enough, you will need other money to cover the difference.
With a roll-up lifetime mortgage, no monthly repayments are required. Interest is added to the loan, and the balance is usually repaid from your home’s sale after the last borrower dies or moves permanently into long-term care. You remain the homeowner.
Look for a plan meeting Equity Release Council standards. Protections for standard lifetime mortgages include:
- Fixed or capped rates: Your rate is fixed or capped for life.
- The right to stay: You can remain in your home, provided you meet the conditions.
- No negative equity: You or your estate will not owe more than the sale proceeds after reasonable selling costs, provided the conditions are met.
- Flexibility: You can transfer the mortgage to an acceptable property and make penalty-free repayments within the lender’s limits.
However, unpaid interest compounds, meaning interest is charged on both the loan and previously added interest. This reduces your remaining equity and potential inheritance. Money you keep may affect means-tested benefits. Fees and early repayment charges may apply.
Read our equity release guide or try our calculator for an estimate. It cannot confirm eligibility or suitability. You need regulated equity release advice and independent legal advice before proceeding.
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What happens if you do nothing?
If you do nothing, you will still owe the outstanding loan when your mortgage term ends. Without an agreed arrangement, the balance becomes overdue, even if you keep paying interest. Interest and charges may also increase your debt.
Your lender could take legal action to repossess your home. This should be a last resort, but ignoring letters can make finding a solution harder. Reply to your lender and get advice straight away if court papers arrive.
You can find free debt advice through MoneyHelper or housing advice from Shelter.
In England and Wales, the Breathing Space scheme may give eligible borrowers up to 60 days’ protection for qualifying debts, including certain mortgage arrears. A debt adviser must arrange this. It does not cancel your debt or automatically give you longer to repay the capital. Different protections apply elsewhere in the UK.
How to plan ahead
If you think you may not have enough to repay your mortgage, start planning as soon as possible.
- Check when your mortgage ends. Find the final repayment date and how much you still owe. Check whether you are already repaying any of the loan each month.
- Review your repayment plan. Check the value of any endowments, savings or investments and when the money will be available. Ask whether the expected payout is guaranteed.
- Ask for a redemption statement. Your lender can provide the amount needed to clear your mortgage on a particular date, including interest and fees.
- Check your budget. Work out what you could afford each month, allowing for household bills, other debts and retirement income.
- Get advice early. Speak to your lender and a regulated adviser about your options, costs and timescales. Get any agreed changes in writing.
Take the next step towards repaying your mortgage
Reaching the end of your interest-only mortgage can feel worrying if you cannot repay the full amount. Speaking to your lender early gives you more time to explore your options and find a way forward.
Independent advice can help you understand the costs and what each choice could mean for your home and retirement. If you are struggling with payments, free debt advice is also available.
For more information on one option available to older homeowners, read our guide to paying off an interest-only mortgage with equity release. Always compare the alternatives before deciding.
Frequently Asked Questions
Yes, this is possible if you cannot repay the loan or agree to another arrangement. Your lender can take legal action to repossess your home, even if you keep paying interest. However, this does not happen automatically when the term ends. Your lender should discuss realistic alternatives and treat repossession as a last resort. Speak to them early if you expect a shortfall. If court papers arrive, get debt and legal advice straight away.
Next steps
Take a look around to find useful information on everything from the costs involved, how much you can get , frequently asked questions and lots more helpful information.
Or use our equity release calculator to get an idea of how much money you could unlock from your home.
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