What if I can’t pay off my interest-only mortgage?

Interest-only mortgages offer lower monthly payments because you’re only paying the interest, not reducing the actual loan amount.

When your mortgage term ends, you’ll need to repay the full original loan. Many homeowners find themselves worried about repaying such a high lump sum when the time comes.

You’re not alone.

The FCA’s latest data shows there are fewer than 1 million interest-only mortgages still outstanding in the UK, with the greatest number maturing in 2031 and 2032 (FCA, 2024). The median borrower is 56 years old with £140,000 outstanding and 8 years remaining on their term.

If you’re concerned about not being able to pay off your interest-only mortgage, know that there are several options available to help. Acting early gives you the best chance of avoiding serious problems like repossession.

At Property Rescue, about 60% of our purchases involve owners with interest-only mortgages nearing expiry. We’ve completed over 500 property purchases in the last three years, so we understand exactly what you’re facing and what works.

Why homeowners struggle to repay interest-only mortgages

There are several common reasons why borrowers face difficulties.

Many took out interest-only mortgages without establishing a solid repayment strategy. Some planned to use investments to pay off the mortgage, but these haven’t performed as expected.

If you were banking on your home increasing significantly in value, market fluctuations may have affected your best-laid plan.

Changing financial circumstances such as redundancy, divorce or illness can also derail financial plans. Rising living costs may have also prevented you from saving as planned.

And age can be a barrier.

What happens if you can’t repay?

If you can’t repay your interest-only mortgage at the end of the term, your lender will expect full payment.

They could take legal action and repossess the property to recover the debt. Your credit score would also be damaged, affecting your ability to borrow in the future.

But lenders don’t want to repossess your home.

Under FCA rules, lenders must treat customers in financial difficulty fairly. While lenders should communicate early and more regularly as maturity approaches, they are not obliged to offer specific options such as term extensions or new products at maturity. Most lenders will contact you well in advance of maturity to discuss your situation.

The key is to act early: ideally 6-12 months before your mortgage term ends.

Options to consider for paying off an interest-only mortgage

Let’s walk through your realistic options, from staying in your home to selling quickly.

Option 1: Contact your lender

Start here.

Contact your lender as soon as possible, ideally 6-12 months before your term ends. They may offer solutions like:

Extending your mortgage term

Your lender may agree to extend your mortgage term by several years, giving you more time to build savings or arrange a repayment plan. This depends on your age, income, and the lender’s criteria (most have upper age limits of 70-75).

Converting to a part-repayment mortgage

You could convert part of your interest-only mortgage to a repayment basis. For example, if you owe £150,000, you might convert £50,000 to capital repayment and keep £100,000 on interest-only. This increases monthly payments but reduces the lump sum you’ll need at the end.

Your lender will need to conduct an affordability assessment to ensure you can meet the higher monthly payments.

Switching to a Retirement Interest-Only (RIO) mortgage

If you’re over 55, a Retirement Interest-Only (RIO) mortgage could be an option.

With a RIO mortgage, you continue paying only the interest each month, just like your current mortgage. The difference? The loan isn’t repaid until you die, move into long-term care, or sell the property. There’s no fixed end date.

Eligibility varies by lender, but you’ll typically need to:

• Be over 50 or 55 (age requirements vary; some lenders have no minimum age)
• Use the property as your main home
• Have sufficient equity in your property
• Prove you can afford the monthly interest payments from your income (including pension income), both now and after retirement

RIO mortgages are assessed on affordability, not on whether you have a repayment plan in place, making them suitable for older borrowers who can’t access standard mortgages. Speak to a mortgage adviser to understand which lenders’ criteria you might meet (MoneyHelper, 2026).

Option 2: Downsize your home

Selling your current property to buy a smaller, less expensive one could free up enough money to pay off your mortgage.

When downsizing makes sense:

• You have significant equity in your current home
• You’re happy to move to a smaller property or different area
• You don’t need to move urgently

Consider the costs:

Downsizing isn’t free. You’ll need to account for:

• Estate agent fees: Average 1.42% including VAT (HomeOwners Alliance, 2025)
• Conveyancing costs: Typically £850-£1,500
• Stamp Duty Land Tax (SDLT) or Land Transaction Tax (LTT): For standard residential purchases, SDLT applies on properties over £125,000 in England, and LTT applies on properties over £225,000 in Wales (as of 2026). Different thresholds apply for first-time buyers (£300,000 in England) and additional properties.
• Removal costs: £400-£1,200 depending on distance and volume

And timeframes.

If you need to move quickly, downsizing on the open market may not be fast enough. More on that shortly.

Option 3: Equity release

If you’re over 55 and want to stay in your home, equity release allows you to access tax-free money from your property’s value while continuing to live there.

The two main types are:

Lifetime mortgage: A loan secured on your home. No monthly repayments are required (though you can choose to make them). The loan plus rolled-up interest is repaid when you die or move into long-term care.

Home reversion plan: You sell part or all of your property to a provider in exchange for a lump sum or regular payments. When you die or move into care, the provider receives their share of the sale proceeds.

Using equity release for mortgage repayment

You could take a lump sum to repay your interest-only mortgage, freeing you from monthly mortgage payments. Or use a drawdown lifetime mortgage to release funds in stages as needed.

Important considerations:

• Interest rates on lifetime mortgages are typically higher than standard mortgages (currently 5-7% as of 2026)
• The debt grows over time if you don’t make monthly interest payments
• Equity release may affect means-tested benefits: if you receive Universal Credit or Housing Benefit, releasing a large lump sum could take you above the £16,000 capital limit, stopping your entitlement. If you receive Pension Credit, savings over £10,000 will reduce your benefit amount
• Your estate will be reduced, leaving less inheritance for your family

Equity release is regulated by the Financial Conduct Authority (FCA). All plans from Equity Release Council members include a “no negative equity guarantee”, meaning you’ll never owe more than your home is worth.

Speak to a qualified equity release adviser before proceeding. They’ll help you understand whether this is the right option for your circumstances.

Option 4: Use savings, investments, or pension

You might use existing resources to clear the debt:

Savings or investments

ISAs, bonds, or other savings could be used to repay your mortgage. Consider whether using these funds now is better than keeping them for later needs.

Pension lump sums

If you’re over 55, you can usually take up to 25% of your pension as a tax-free lump sum. The current lump sum allowance is £268,275 tax-free across all your pension schemes (Gov.uk, 2026).

Option 5: Government support: Support for Mortgage Interest (SMI)

If you’re receiving certain benefits, you may be eligible for Support for Mortgage Interest (SMI).

What is SMI?

SMI helps with the interest payments on your mortgage if you’re on qualifying benefits: Universal Credit, Pension Credit, Income Support, income-based Jobseeker’s Allowance, or income-related Employment and Support Allowance.

SMI only helps with ongoing interest payments. It doesn’t help you repay the capital lump sum at the end of your mortgage term. But it can help prevent arrears building up while you arrange another solution.

Option 6: Sell your property quickly

For many people, selling the property is the most straightforward way to clear the mortgage and avoid repossession.

When selling makes sense:

• You need funds quickly and can’t wait 4-5 months for an open-market sale
• Your mortgage term is ending soon or you’re already in arrears
• The property is empty and becoming a burden (maintenance, security, bills)
• You’re happy to move to rented accommodation or a smaller property purchased outright with remaining equity

Selling on the open market vs. selling to a cash buyer

Here’s the reality:

Here’s what we typically offer:

We generally offer around 80% of market value for a fast sale. That might sound low, but when you account for open-market costs (agent fees ~1.5%, repairs, mortgage interest during a 4-month sale), the net difference is often only 5-10%.

And here’s what you get in return:

• Certainty: 98% of accepted offers complete (across our 350+ sales). No chain, no buyer mortgage fall-throughs, no renegotiations.
• Speed: Average completion time of 28 days from offer acceptance.
• No fees: We pay all legal costs and appoint solicitors on your behalf.

We turn away roughly 10% of enquiries where sellers would be better served listing on the open market because a cash sale isn’t always the right answer. If your property is in good condition, you’re in a strong market area, and you have 6-12 months to sell, the open market might get you a better net outcome.

But when speed and certainty matter, especially if repossession is looming, a cash sale can be the best option.

Because of our Sale and Rent Back service, we’re one of the only house buying companies in the UK that’s regulated by the FCA (Register 522471). We’re also founding members of the National Association of Property Buyers (NAPB).

Property Rescue operates in England and Wales and has been helping homeowners since 2005 from our office in Borehamwood, Hertfordshire.

Getting help and advice

Don’t face this alone.

Free, impartial advice is available from:

• Shelter: Housing charity offering advice on repossession and mortgage arrears
• Citizens Advice: Free guidance on debt management and housing issues
• MoneyHelper: Government-backed service offering free financial guidance
• Your mortgage lender: They have a regulatory duty to support you and offer forbearance options

If you’re considering equity release or pension withdrawals, speak to an FCA-regulated financial adviser.

The most important thing: Act early

Ignoring the problem will only limit your options.

Start planning 6-12 months before your mortgage term ends.

The earlier you act, the more options you have and the less pressure you’ll feel.

Selling fast to repay your interest-only mortgage

If you need a quick sale, Property Rescue can help.

We can provide a preliminary cash offer within hours of your enquiry. If you accept, we can exchange contracts in as little as 48 hours, with completion typically within 2-4 weeks or to your preferred timeframe.

We’ll also cover all legal fees, valuation costs and appoint solicitors on your behalf. With our help, you can avoid repossession and resolve your mortgage debt without the uncertainty or delays of the open market.

98% of our clients say they’re surprised by how quickly the legal side moves and how straightforward the process is when there’s no chain involved.

Our team’s compassionate and professional service is designed to make stressful situations easier. We’ve been doing this since 2005 and we’ve helped hundreds of homeowners facing exactly the situation you’re in now.

Call us on 020 8634 0224 for a free, no-obligation chat about your situation.

Or visit propertyrescue.co.uk to request a cash offer online.