Can I Extend My Interest Only Mortgage Term?

In this article we look to address a question that we have heard a number of holders of interest-only mortgages are asking, can I extend my interest only mortgage term? The other question we will answer is can I extend my mortgage term on interest only?

If you are looking for the answer to the other popular question regarding what your options are if you don’t have the money available to pay off your interest only mortgage check our money matters guide what if I can’t pay off my interest-only mortgage?

Let’s start first by explaining what an interest-only mortgage is.

Interest-only mortgages

Interest-only mortgages can be a great tool for property buyers, offering flexibility and lower initial payments. During the interest-only phase, you pay just the interest, not the principal, resulting in lower monthly costs. The big difference between an interest only mortgage and other mortgages is that with an interest only mortgage the balance owing to the lender never goes down and at the end of the term of your mortgage the same sum you borrowed when you took out the mortgage will need to be repaid full.

Extending an interest-only mortgage term: is it possible?

Yes, it is possible, but it’s not always a straightforward process as most lenders will have their own terms and lending criteria. Remember, interest-only mortgages are considered riskier by lenders, which can make extending the term more challenging. The first thing your lender will want to do is ensure you meet their minimum income requirements because of this younger borrows will have a better chance of extending their interest only mortgage term than older borrowers, as most lenders cap the lending age at 75. However, if you’re retired and able to prove your ability to make further monthly payments you may still meet their criteria.

Ultimately, whether an extension is granted is at the lender’s discretion and the sooner you get in touch with them the more time it will give both you and them to consider your available options.  

Step 1:  Speak to your Lender Early

The key takeaway here is to start exploring your options as early as possible, the sooner you get in touch with your lender the more they will be able to do. Delaying the decision to extend your interest-only mortgage could limit your choices and result in less favourable terms in the future.

Be aware that while extending your mortgage term provides you with more time to accumulate the funds needed to pay off the loan entirely, it also means you will be paying more in interest over the long run.

Step 2: Contact a Specialist Mortgage Broker

While you are considering whether to extend your interest only mortgage it could be worth enlisting the help of a specialist broker who deals with interest-only home loans. They can guide you in extending your mortgage term and help you explore other mortgage alternatives enabling you to make a well-informed decision. Do shop around for your advice as costs can vary.

a)     Flexible Durations:

Interest-only mortgages typically range from 5 to 25 years. However, you might come across lenders willing to extend it to 30 years or even more, though longer terms are less common. Ultimately your application’s strength, will come down to whether or not you meet a lender’s eligibility criteria. If you do then it will certainly increase your chances of securing the requested extended mortgage term on interest only.

b)     Remortgaging:

Extending simply means giving yourself more time to pay off the loan in full, while remortgaging involves applying for a new mortgage product. There can be several different ways in which you could extend the mortgage, you could turn all or part of it into a repayment mortgage with a later agreed full repayment date, or maybe your lender will let you repay with several agreed payments rather than just one. 

When to consider extending the term

Extending your interest-only mortgage can be a wise choice in several scenarios. Especially if you have a viable repayment strategy, such as expected income growth, property sales, or reduced expenses, making it feasible to clear the mortgage at the end of the new term

However, it’s crucial to weigh up the pros and cons, as extending the term increases the overall cost of your mortgage over time and it slows down the equity or value growth in your property, as you’re reliant on property value appreciation for financial gains.

If you have a repayment mortgage and are struggling to make your monthly payments but have not fallen into arrears under the new mortgage charter you can contact your lender and apply to switch to an interest only mortgage for 6 months or apply to can extend your mortgage term to reduce your monthly payments and then have the option to switch back to your original term within 6 months. You will be able to do this without your lender asking for a new affordability check and your credit score will not be affected.

Alternatives to consider

If you cannot extend your interest-only mortgage or it doesn’t align with your financial goals, there are alternatives worth exploring:

Downsizing

Selling your current property for a more affordable one can free up equity to pay off your mortgage and remove the need to extend an interest only mortgage term.

Refinancing

Switching to a new lender and exploring alternative mortgage instruments may provide you with the financial flexibility you are looking for.

Equity release

If you’re over 55, you might be able to take out equity release to pay off your interest-only mortgage removing the need to extend it. One equity release choice is a lifetime mortgage which is a loan secured against your home that lets you access the money tied up in it without having to move out. There are a number of financial considerations to take into account and therefore it as advisable to seek advice from a financial advisor first.

Retirement interest-only mortgage

Switch to a retirement interest-only mortgage, offering repayments at a fixed rate without a repayment deadline.

How can Gaffsy help?

If you decide not to extend an interest-only mortgage term and that you would prefer to sell your property, whether it’s a flat in Manchester, or you want to sell house in London, or you’re a landlord selling a buy-to-let, Gaffsy can provide you with a free valuation and no-obligation cash offer.  As a market leading genuine cash house buyer, we are well-prepared to facilitate a fast flat sale, expedited house sale and a quick buy-to-let transaction all hassle-free.

What Gaffsy guarantees

• Fast property sale: If your priority is to sell your property quickly, Gaffsy is your solution. We are self-funded which means we don’t need to get a loan approval or wait on a mortgage; we can purchase your property as soon as needed.  
• We buy any house: Whether you’re selling a flat, house, selling a garage, need to sell land or buy-to-let property, we are ready to make you a cash offer.  We purchase property in any condition and location and we understand the nuances of different property types and can tailor our approach to your specific needs.
• No delays or complications: Regardless of potential challenges like cladding issues, squatters, or a property with a short lease, Gaffsy guarantees a sale within a timeframe that suits you. In fact, we can often close the deal in a matter of days, providing you with the funds precisely when you need them.
• Smooth, hassle-free process: We pride ourselves on offering a seamless and trouble-free sales process. You are kept informed every step of the way and you can walk away at any time. When you sell to Gaffsy you avoid the complexities and paperwork typically associated with selling a property.
• No fees or agent commissions: When you choose Gaffsy, there are no hidden fees or agent commissions. We do not charge for viewings and we always pay your legal fees. Our final agreed cash offer is what you receive on completion, ensuring a financially transparent efficient sale.

Get your cash offer today

If you’re ready to get a no-obligation free cash offer for your property today then contact Gaffsy. Our team know how stressful selling a property can be and that each seller has unique requirements which is why we tailor our service to the individual. Our commitment is to ensure that are totally comfortable with the decisions they make. We never apply pressure to steer anyone towards an option that doesn’t feel right for them. Instead, we strive to consistently present fair and competitive offers.

So, get in touch with us today and take the first step towards a hassle-free property sale.