When an interest-only mortgage reaches the end of its term, the full amount you borrowed is due. If you have adverse credit and cannot repay it, you may still have options: switching to repayment, extending the term, moving to a new lender, a retirement interest-only (RIO) mortgage, or selling and moving somewhere smaller. Which of these are open depends on your equity, your income and age, and your credit history. None is guaranteed, and your current lender must treat you fairly and talk through the options with you.
This page explains each route, how bad credit can affect it and what to do if the term has already ended. It does not recommend any product. If you are worried about money, free and confidential help is available from MoneyHelper, StepChange and National Debtline.
On this page
In short
- At the end of an interest-only term the whole balance is due, not just the monthly interest.
- Switching to repayment or extending the term usually means a fresh look at affordability.
- Retirement interest-only and lifetime mortgages are specialist products that need regulated advice.
- Contact your lender well before the end date; lenders must treat you fairly and discuss options.
What happens when an interest-only term ends?
Throughout an interest-only mortgage you pay the interest each month, but the balance does not go down. On the final day of the term, the original loan is due in full. Most people planned to repay it from an investment, a pension lump sum, the sale of another property or the sale of the home itself.
Problems arise when that plan falls short, which is common. An endowment may have paid out less than expected, or circumstances may have changed. If credit problems have built up at the same time, moving the balance to a new lender can be harder, because fewer lenders offer interest-only and fewer again consider adverse credit.
Your lender will usually write to you in the years before the end date to ask how you plan to repay. Replying early gives you more choice. Waiting until the term has ended can leave fewer routes open.
What are the options if you cannot repay the balance?
The table sets out the main routes people look at. Availability varies between lenders and depends on your circumstances, so treat it as a starting point for a conversation with your lender or an adviser.
| Option | How it works | What to check with bad credit |
|---|---|---|
| Switch to repayment | Monthly payments include capital, so the balance is cleared by the end of a new term | The higher payment must be affordable, and your lender will usually check this |
| Extend the term | Your lender gives you longer, on interest-only or repayment | Your age at the end of the new term and your income in retirement |
| Part and part | Some of the balance moves to repayment, the rest stays interest-only | You still need a credible plan for the interest-only part |
| Remortgage to a new lender | A new lender repays your existing mortgage | Fewer lenders offer interest-only; recent credit problems narrow choice further |
| Retirement interest-only | You pay interest monthly and the loan is usually repaid when the home is sold | A specialist regulated product; the lender checks you can afford the interest |
| Sell and move | You sell, repay the mortgage and buy somewhere cheaper or rent | Timing, moving costs and whether enough equity remains |
General descriptions only, not lender criteria. Not every option will be offered to everyone, and terms vary by lender.
How does bad credit affect switching to repayment or extending the term?
Staying with your current lender is often the first route to explore. If you are not borrowing more, a lender may be able to agree a change without a full application. Switching to repayment or extending the term changes your monthly payment, though, so the lender will usually want to see that the new payment is affordable.
Your credit file matters most if you move lender. A new lender will run a hard search and look closely at your recent history. The entries that tend to carry most weight are:
- missed mortgage payments or arrears in the last year or two
- recent county court judgments, especially if unsatisfied
- defaults on credit cards, loans or phone contracts
- an active IVA, debt management plan or recent bankruptcy
Older, settled problems usually weigh less, and a lot of equity can widen choice. Our guide to how LTV affects a bad credit remortgage explains why.
Can you remortgage to a new lender and stay on interest-only?
It can be possible, but interest-only lending is more restricted than repayment lending. Lenders offering it usually want a clear, believable repayment strategy, and some may set minimum equity or income levels. With adverse credit on top, the number of lenders who may consider you can be small.
Repayment strategies some lenders may consider
- The planned sale of the home, where enough equity would remain to move
- Investments such as ISAs, with recent statements
- A pension, where a lump sum is expected to cover some of the balance
- The sale of another property you own
Our guide to interest-only and repayment mortgages explains how the two compare. If your term is due to end within the next year or two, our page on an interest-only term ending soon looks at the timing in more detail.
Retirement interest-only and lifetime mortgages: what is the difference?
A retirement interest-only mortgage is a regulated mortgage where you pay the interest each month and the loan is usually repaid when the home is sold after you die or move into long-term care. The lender checks that you can afford the monthly interest, so income and credit history still matter. Our page on retirement interest-only with bad credit covers this in more depth.
A lifetime mortgage, a form of equity release, is a different product. Interest is often added to the loan rather than paid monthly, so the amount owed can grow over time. Both products can reduce what you leave to your family and may affect means-tested benefits.
We do not recommend retirement interest-only or lifetime mortgages. They are long-term decisions that need specialist regulated advice, and it often helps to involve your family. Our page on later life remortgages with bad credit compares them with a standard remortgage.
What if the term has already ended?
If the end date has passed and the balance is still outstanding, contact your lender straight away. Lenders must treat you fairly. Depending on your situation, a lender may give you time to sell, agree a short extension or look at a longer-term arrangement. Repossession is a last resort, and lenders must follow set steps before going to court.
- Call your lender and explain your plan, even if it is not finished.
- Get free advice from National Debtline or StepChange, who can help you prepare for the conversation.
- Gather evidence of any savings, investments or pension you could use.
- Get an idea of your home’s value, so you know how much equity you have.
- If you have fallen behind, read our page on remortgaging with mortgage arrears.
What may affect your options when an interest-only term ends
Lenders look at the whole picture, not just the credit file. These are the details that most often shape what may be possible.
| Factor | Why it matters |
|---|---|
| Time left on the term | More time before the end date usually means more options, including a planned sale or a product change. |
| Size of the balance | The amount due affects whether repayment is affordable and whether savings could cover part of it. |
| Property value and equity | More equity generally widens choice and makes selling and moving a more realistic fallback. |
| Your repayment strategy | Lenders offering interest-only usually want evidence of a credible plan, such as investments or a planned sale. |
| Age at the end of a new term | Lenders set their own maximum ages, which can limit how long a term extension or new mortgage can run. |
| Income now and in retirement | Switching to repayment raises the monthly cost. Lenders look at pension income as well as earnings. |
| Mortgage payment history | A clean record of interest payments helps, even if other credit has slipped. |
| Other credit problems | Recent CCJs, defaults or an active debt solution can narrow the choice of new lenders. |
| Other secured borrowing | A second charge loan on the home reduces available equity and must be taken into account. |
| Employment type | Self-employed income is assessed differently. See our page on self-employed remortgages with bad credit. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Your mortgage balance, current payment and the date the term ends
- Any letters from your lender about the end of the term
- Details of your repayment plan and recent statements for any investments or pensions
- An estimate of your property’s value
- Your income now, and your expected income in retirement
- Your credit reports from Experian, Equifax and TransUnion
- Details of any CCJs, defaults, arrears or debt solutions
- Your age, and the age of anyone else on the mortgage
Specific situations
More detail for particular circumstances.
Can you get a retirement interest-only mortgage with bad credit?
How a retirement interest-only mortgage is assessed, how it differs from a lifetime mortgage, and how adverse credit affects the options available.
Interest-only term ending in the next year or two
A timeline for the months and years before an interest-only term ends, what your lender may ask for, and how to plan around adverse credit.
Frequently asked questions
Will my lender repossess my home if I cannot repay at the end of the term?
Not automatically. Lenders must treat you fairly and consider options before taking action, and repossession is a last resort that follows set pre-action steps. The earlier you talk to your lender, the more options there usually are. Free advice from MoneyHelper or National Debtline can help you prepare.
Can I extend my interest-only mortgage if I have bad credit?
Your current lender may agree an extension, but it is not guaranteed. The lender will usually look at your age at the end of the new term, whether the payments are affordable and whether you have a credible plan to repay. A clean recent payment record on the mortgage itself can help.
Does switching to repayment need a credit check?
With your current lender, a change to your existing mortgage may not need a full new application, but the lender will usually check that the higher payment is affordable. Moving to a new lender involves a full application with a hard credit search. Ask your lender how it handles the change before you apply.
Will a lender accept selling my home as my repayment plan?
Some lenders may accept a planned sale, often called downsizing, where there is enough equity to repay the mortgage and still buy or rent somewhere else. Others may not, or may set conditions. An adviser can check which lenders may consider it alongside your credit history.
Can I get a retirement interest-only mortgage with a CCJ?
It may be possible, but lenders set their own criteria and will look at your credit history as well as your ability to pay the interest. Unsatisfied judgments or recent problems usually make things harder. Retirement interest-only is a specialist product, so speak to a regulated adviser before deciding anything.
Is part and part an option with adverse credit?
Part and part, where some of the balance is repaid and the rest stays interest-only, can suit people who can afford some capital repayments but not all. Whether a lender offers it depends on its own criteria, your affordability and your plan for the interest-only part.