Mortgage help: Should you switch to interest-only or extend your term?
If you're struggling to meet your monthly repayments, mortgage charter help lets you temporarily switch to interest-only payments or extend your mortgage term – without it impacting your credit file. Here we take a deep dive in to both options, plus we've a new mortgage help calculator which lets you work out how much each could save you.
Is this the right guide for you?
This is an in-depth analysis of the mortgage charter help. If you're up to date with payments, read Struggling to pay your mortgage as it has many other things to try first. If you've already missed a payment, see Mortgage arrears.
What new mortgage help is available?
Last year, to help ease the pressure of rising mortgage rates, the Government launched the 'mortgage charter', alongside the Financial Conduct Authority (which regulates mortgages). Most UK lenders, including all the major ones, have signed up – see the full list below.
The charter enables lenders to offer flexible support (or breathing space) if you're struggling with your mortgage repayments – but haven't yet missed one. If that's you, and your lender has signed up to the charter, you can choose ONE of the two following options, to be used once:
- Option 1: Switching to interest-only repayments. This will last for six months, during which time your monthly repayments will be lower. Full info on interest-only help.
- Option 2: Extending your mortgage term. For example, from 15 to 20 years. This will also lower your repayments, and there's no cap on how long this extension can last. Full info on extending your term.
We run through exactly how these two measures work below, including what impact they'll have on your payments (both during and after the support).
Option 1: Switch your mortgage to interest-only for six months
Here's how it works:
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You'll just be repaying the 'interest' element of your mortgage. In other words, you'll pause repaying the 'capital' (the money you've actually borrowed).
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This option lasts for up to six months. After this your mortgage payments will snap back to normal (plus a bit extra).
- There's no affordability check. Either when you apply, or when your mortgage reverts back to normal. So acceptance and switching back should be seamless.
- There should be no adverse impact on your credit file. Other lenders will likely see your mortgage repayments are smaller, but there'll be no information on your file to suggest why.
This will LOWER your monthly repayments, possibly by £1,000+
As you'll only be paying the interest due on your mortgage, your monthly payments will be smaller than normal – by how much depends on the size and length of your mortgage. The longer you've been paying off your mortgage and the smaller your remaining debt is, the bigger the reduction will be.
That's because in the early years of repaying your mortgage, the interest makes up more of your monthly repayments than it does in the later years (conversely, the capital accounts for less in the early years and grows as time goes on). The table below has some handy examples, or you can jump to our calculator below to see the likely impact on YOUR payments.
Mortgage term remaining | Mortgage left to pay | Normal monthly repayments |
Interest-only monthly repayments | How much you'll save each month |
20 years | £195,350 | £1,289 | £814 | £475 |
15 years | £163,000 | £1,289 | £697 | £592 |
10 years | £121,550 | £1,289 | £506 | £783 |
5 years | £68,330 | £1,289 | £285 | £1,004 |
1 year | £15,055 | £1,289 | £63 | £1,226 |
But your repayments will be HIGHER when the support ends
After six months, when the interest-only period comes to an end, your monthly mortgage payments will go back up. In fact, your payments will actually be higher than they were before.
That's because your outstanding mortgage balance – which will have stayed the same whilst you only made interest-only payments – will now need to be cleared over a shorter period of time. The table below should help show the monthly difference (plus the total added cost to your mortgage).
Mortgage term remaining | Mortgage balance | Normal monthly repayments | Monthly payments after 6mths | Total added cost to mortgage |
20 years | £195,350 | £1,289 | £1,309 | £1,665 |
15 years | £163,000 | £1,289 | £1,319 | £1,547 |
10 years | £121,550 | £1,289 | £1,342 | £1,275 |
5 years | £68,330 | £1,289 | £1,416 | £787 |
1 year | £15,055 | £1,289 | £2,546 | £186 |
What if I need help for longer than six months?
If you need more than six months of help, you might want to consider extending your term instead as this isn't time-limited in the same way. While your lender might allow you to continue on an interest-only basis beyond the initial six months, this would be subject to normal mortgage forbearance rules, which CAN have an impact on your credit file – for more on this, see our Mortgage arrears guide.
Option 2: Extend your mortgage term for six months (or longer)
The second option if you're struggling is to extend your mortgage term. Here's how it works:
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You choose how long to extend your term by. For example, you could increase your remaining term from 10 to 15 years (though you can't extend it into retirement).
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The longer you extend by, the more your monthly payments will reduce. Extending by 10 years would have a greater impact than extending by five, for example.
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There's no affordability check. So acceptance should be seamless.
- You can reverse the change within six months with no questions asked. If it's after the six month period has expired, you may still be able to switch back, but the lender would do affordability checks.
- You don't have to reduce your mortgage term in future. So you can treat the term extension as a longer-term measure.
- There'll be no adverse impact on your credit file. A lender will be able to see that your mortgage repayments are smaller than before, but there'll be no information on your file to suggest why.
This will lower your payments, but usually not by as much as switching to interest-only
Extending your mortgage term will reduce the size of your monthly repayments – by how much depends on two things:
- The more you extend your mortgage term by, the more this will reduce your repayments (as they'll be spread over a longer period). For example, if you had a £100,000 mortgage at 5% with 15 years left on your term, you'd be repaying £791/month. Temporarily increase your term to 20 years and your repayments would drop to £505/month; increase to 25 years and they'd be £482/month.
- The bigger your mortgage balance, the bigger the impact of any term extension.
In most cases, extending your mortgage term won't reduce your current monthly payments by as much as temporarily switching to interest only, because you'll still be paying both the interest and the capital each month, just over a longer period.
But extending your term is the more flexible option, so it may be better if you're not sure how long you'll need help with your mortgage...
You decide how long to keep the extension in place – your mortgage term WON'T automatically revert back after 6 months
When you extend your term, you'll need to decide how long to keep the extension in place. You have three choices, but the first one is the default:
- Keep your mortgage extension. This means your monthly repayments will stay lower. HOWEVER, your mortgage will cost you £1,000s or £10,000s more in interest.
- Shorten your mortgage term WITHIN the first six months. This can be done without checks, but will only be an option for those who find spare cash within six months to resume their old payments (plus a bit). You don't need to fully re-shorten your term to its old length. You'll need to contact your lender to do this option.
- Shorten your mortgage term AFTER the first six months. Here you'll need to undergo an affordability check. If you pass the check, you can choose by how much to shorten your term.
If you do shorten your term again, you'll be contracted to make the higher payments every month. So you should be confident you can make the repayments before committing to shortening your term. Overpaying your mortgage could be a good middle ground.
To help you decide, the tables below have some examples that show how much extending your term will cost if you just do it for six months (and then revert back), versus making the extension permanent. Or you can use our calculator below to see the likely impact on your payments.
Mortgage balance | Current term | Normal monthly payments | Monthly payments during help | Monthly payments after help | Total cost of term extension |
£50,000 | 10 years | £530 | £395 | £539 | £220 |
£100,000 | 15 years | £791 | £660 | £797 | £332 |
£150,000 | 20 years | £990 | £877 | £995 | £396 |
£200,000 | 25 years | £1,169 | £1,074 | £1,173 | £433 |
Mortgage balance | Current term | Normal monthly payments | New monthly payments | Total added cost of term extension |
£50,000 | 10 years | £530 | £395 | £7,532 |
£100,000 | 15 years | £791 | £660 | £16,047 |
£150,000 | 20 years | £990 | £877 | £25,481 |
£200,000 | 25 years | £1,169 | £1,074 | £35,758 |
Calculator: what effect does each option have on your payments?
Generally speaking, which of the two options is better for you will depend on which of these two broad categories you fall into:
- Going interest-only likely wins if you need a significant amount of short-term help. That's because it generally reduces your monthly bills by a greater amount. HOWEVER, you pay for it in the long-run as it will likely add more to the total cost of your mortgage. The other big disadvantage is that this help only lasts up to six months.
- Extending your term likely wins if you need a small amount of short-term help OR if you need longer-term help. While it usually doesn't reduce your monthly payments by as much as going interest-only, it generally won't add as much to the total cost of your mortgage during the first six months. The other key advantage is that it's more flexible – as it can last for longer than six months if needed.
But there are lots of caveats, and which option is likely to be better for you depends on your individual circumstances – which is why we've built this new calculator.
Calc: What effect does each option have on your payments?
Just punch in your current mortgage details – such as outstanding balance, interest rate, and term remaining – and the calculator will give you an approximation of:
- What your monthly payments will be after the support ends
- How much the support will add to the overall cost of your mortgage
Mortgage charter support calculator
IMPORTANT: This calculator is a READY RECKONER. Use it to guide your thinking and then follow up by talking through the options with your lender if you need more help.
How to get help under the mortgage charter
More than 90% of UK mortgage lenders currently offer mortgage charter support.
Getting this support is usually just a question of picking up the phone or filling in a short online form with your basic mortgage deals. Below we've got a table which lists how you can access mortgage charter support from some of the main lenders, as well as whether they're offering any advice. If you lender isn't listed – but has signed up to the mortgage charter – contact it directly.
Lender | Option 1. Interest-only | Option 2. Term extension | Is advice available? |
Barclays | You can move to interest-only payments for 6mths.
Apply online (to begin your application you'll need to go via the Barclays 'mortgage charter calculator'). |
You can extend your mortgage term (but not into retirement).
Apply online (to begin your application you'll need to go via the Barclays 'mortgage charter calculator'). |
Yes - but limited to impact of mortgage charter support on payments.
For further mortgage payment help, call 0333 202 7407 (please note you can't apply for support via telephone). |
Bank of Ireland UK | You can move to interest-only payments for 6mths.
To apply, call 0345 300 8000, then press option six. |
You can extend your mortgage term (max 35 yrs and not into retirement).
To apply, call 0345 300 8000, then press option six. |
Yes - call 0345 300 8000 |
HSBC | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details). |
You can extend your mortgage term (but not into retirement).
Apply online (you just need to give basic mortgage details), or call 0800 783 6533. |
Yes - call 0800 783 6533 |
Halifax | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details). |
You can extend your mortgage term (but not into retirement).
Apply online (you just need to give basic mortgage details), or call 0345 850 3705. |
Yes - call 0345 850 3705 |
Leeds Building Society | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details), or call 0800 072 8738. |
You can extend your mortgage term (max 40 yrs and not into retirement).
Apply online (you just need to give basic mortgage details), or call 0800 072 8738. |
Yes - but limited to impact of mortgage charter support on payments.
For further mortgage payment support call 0800 072 9739 |
Lloyds | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details). |
You can extend your mortgage term (but not into retirement).
Apply online (you just need to give basic mortgage details), or call 0345 603 1637. |
Yes - call 0345 603 1637 |
Nationwide | You can move to interest only payments for 6mths.
Apply online (via Mortgage Manager), or call 03457 30 20 10. |
You can extend your mortgage term (but not into retirement).
Apply online (via Mortgage Manager), or call 03457 30 20 10. |
Yes - call 03457 30 20 10. Advice limited to impact of mortgage charter support on payments. |
Natwest | You can move to interest only payments for 6mths.
Apply online (via Manage your Mortgage). |
You can extend your mortgage term (but not into retirement).
Apply online (via Manage your Mortgage). |
Yes - call 0800 096 9527 |
Santander | You can move to interest only payments for 6mths.
Apply online (via Manage my Mortgage), or call 0800 917 5630. |
You can extend your mortgage term (max term 40 yrs and not into retirement).
Apply online (via Manage my Mortgage), or call 0800 917 5630. |
Yes - but limited to impact of mortgage charter support on payments.
For further mortgage payment help see Santander's cost-of-living support. |
Skipton Building Society | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details). |
You can extend your mortgage term (but not into retirement).
Apply online (you just need to give basic mortgage details). |
Yes - call 0345 607 9817 |
TSB | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details). |
You can extend your mortgage term (but not into retirement).
Apply online (you just need to give basic mortgage details) - this will be followed by a call back. |
Yes |
Yorkshire Building Society | You can move to interest only payments for 6mths.
Apply online (you just need to give basic mortgage details). |
You can extend your mortgage term (but not into retirement).
To apply, call 0345 1200 100. |
Yes - call 0800 138 2302 |
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