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?

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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).

  • Which lenders are signed up to the mortgage charter?

    The following lenders are signed up to the mortgage charter:

    • AIB Group (UK), including AIB (NI) and Allied Irish Bank (GB)
    • Aldermore Bank
    • Bank of Ireland UK
    • Barclays
    • Bath Building Society
    • Buckinghamshire Building Society
    • The Co-operative Bank, including Platform and Britannia
    • Coventry Building Society
    • Danske Bank
    • Darlington Building Society
    • Dudley Building Society
    • Earl Shilton Building Society
    • Ecology Building Society
    • Family Building Society
    • Furness Building Society
    • Glasgow Credit Union
    • Hinckley & Rugby Building Society
    • HSBC, including First Direct
    • Kensington Mortgage Company
    • Leeds Building Society
    • Leek Building Society
    • Lloyds, including Halifax and Scottish Widows
    • Loughborough Building Society
    • Mansfield Building Society
    • Melton Mowbray Building Society
    • Metro Bank
    • Monmouthshire Building Society
    • Nationwide Building Society
    • NatWest, including RBS and Ulster Bank
    • Newbury Building Society
    • Newcastle Building Society, including Manchester Building Society
    • Nottingham Building Society
    • OSB Group, trading as Precise Mortgages and Kent Reliance
    • Perenna
    • Principality Building Society
    • Progressive Building Society
    • Santander
    • Scottish Building Society
    • Skipton Building Society
    • Spring Financial Group Limited, including MPowered Mortgages
    • Suffolk Building Society
    • Teachers Building Society
    • Tipton & Coseley Building Society
    • TSB, including Whistletree
    • The Vernon Building Society
    • United Trust Bank Limited
    • Virgin Money, including Clydesdale Bank and Yorkshire Bank
    • West Bromwich Building Society
    • Yorkshire Building Society

    Lender not on the list? Unfortunately you can't access the support described in this guide. But that doesn't mean your lender won't be able to help if you're struggling with your repayments – see our Struggling to pay guide for details.

Option 1: Switch your mortgage to interest-only for six months

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Here's how it works:

  • 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).

  • 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.

Impact of switching to interest-only: during the support

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

Assumes a constant interest rate of 5%. 

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).

Impact of switching to interest-only: after the support

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

Assumes a constant interest rate of 5%.

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)

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The second option if you're struggling is to extend your mortgage term. Here's how it works:

  • 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).
  • 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.
  • 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:

  1. 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. 

  2. 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:

  1. 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.

  2. 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.

  3. 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.

Impact of temporarily extending your term by five years

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

Assumes a constant interest rate of 5%, and that the term reverts to its original length after six months.

Impact of permanently extending your term by five years

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

Assumes a constant interest rate of 5%, and that the term is permanently extended by five years.

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 during the period of support
- 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

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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.

Lenders that have launched mortgage support (1)

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

(1) This table is not an exhaustive list. 

Mortgage charter FAQ

  • What if my lender isn't signed up to the mortgage charter?

    If your mortgage provider isn't on this list of lenders signed up to the mortgage charter, it doesn't necessarily mean it won't offer options similar to those above.

    However, be mindful that the support it does offer will fall under normal mortgage forbearance rules. This can have an adverse impact on your credit file (unlike mortgage charter support), so it's best to check if you're unsure. For more on forbearance, see our Struggling to pay guide.

  • Will there be an impact on my credit file?

    As part of the mortgage charter, lenders have committed to ensuring that your credit file WON'T be negatively affected in any way if you opt for one of the measures outlined above.

    The practicalities of exactly how this'll work vary by lender, but in general:

    • The fact you're repaying less each month WILL show on your credit file...
    • ...But there'll be no marker or information added to your file that suggests you're receiving mortgage support (or even an explanation as to why you're paying less than before).

    So, while other lenders will potentially be able to see that you're paying less in mortgage repayments than previous months, they won't necessarily know the reasons why.

    Where you do accept mortgage charter support, your lender should clearly explain the impact that particular measure will have on your credit file, if any. If you're unsure or confused about it, do reach out to your lender first to get more information on what it could mean for you.

  • What if I want to switch to interest-only permanently?

    Interest-only mortgages are rare these days.

    If you want to permanently switch to interest-only, you'll have to apply to your lender (that's if it even has the option). Where it does, you'll need to undergo an affordability check and – crucially –  prove you've got a credible repayment strategy in place to clear the balance when the mortgage expires.

    There's no guarantee your lender will agree to a permanent switch to interest-only.

  • Can I partially reduce my mortgage payments but not go interest-only?

    Partially reducing the capital element of your mortgage repayments – but not to zero, which would mean interest-only – is known as a part-part repayment. 

    This option is not available under the mortgage charter.

    However, part-part does fall under normal mortgage forbearance rules (see our Struggling to pay guide for more on this). So, you could contact your lender to see if it offers this – though be mindful that forbearance can adversely impact on your credit file (unlike mortgage charter support).

  • Can a lender repossess my home?

    Lenders who have signed up to the mortgage charter have committed to not force through a repossession within 12 months of a homeowner missing their first mortgage repayment (though they can still begin repossession proceedings).

    This effectively means that while lenders are able go to court in order to repossess your home (where it has exhausted all other options) – in reality, any court proceedings would not begin until at least 12 months after you started missing mortgage payments. 

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