NatWest mortgages are available to over 18s. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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What is an interest only mortgage?
- An interest only mortgage allows you to make monthly payments that just cover the interest on the money you have borrowed. These payments do not pay off any capital of the sum originally borrowed.
- This means that you’ll need to repay the full mortgage amount in one lump sum at the end of the mortgage or when you sell the property.
Interest only mortgages
- An interest only mortgage, a type of mortgage where you pay just the loan's interest. Once you reach the end of the mortgage term, you're required to repay the original mortgage amount (capital) in full.
- There's a higher risk of negative equity than a repayment mortgage. The mortgage balance remains the same over the mortgage term, leaving you more exposed to changes in house prices.
- The total amount paid in interest over the life of an interest only mortgage will also exceed the interest paid on a repayment mortgage.
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Capital repayment mortgages
- A capital repayment mortgage, also known as a repayment mortgage, means you'd be paying back part of the mortgage and interest each month, the monthly payments are calculated so that the loan is paid off at the end of the mortgage term.
- By paying off both capital and interest, your total debt will reduce over time, meaning the amount you owe in interest will begin to reduce.
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Can I pay off an interest only mortgage early?
- You can pay off your interest only mortgage early, but there may be limitations to the amount you can repay without incurring an Early Repayment Charge (ERC), depending on your mortgage.
- Check your mortgage terms for more information on repayments limits or charges.
Setting an interest only mortgage repayment plan
If you apply for an interest only mortgage, we will work with you to agree a repayment plan to pay off the borrowed capital - your plan can also include an endowment, a pension plan, or a stocks and shares ISA. You are liable to repay all the capital borrowed, even if you fall short at the end of the term.