An alternative repayment arrangement is an agreement we can make if you’re facing difficulties with your mortgage repayments. It’s designed to help you manage your mortgage more effectively during challenging times.
We have multiple alternative repayment arrangements and one of these, or a combination of them, could be suitable for you. How long an arrangement lasts will depend on your particular circumstances.
The alternative repayment arrangements we provide are:
Arrangement | How it works |
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Interest-only payments | You pay only the interest on your mortgage for an agreed length of time. |
Reduced repayments | You pay more than just the interest, but less than your usual repayment, for an agreed length of time. At the end of that time, your mortgage repayments for the remaining term are recalculated. This means that your repayments will then increase. |
Moratorium | You stop making mortgage repayments for a short amount of time (up to three months). At the end of that time, your mortgage repayments for the remaining term are recalculated. This means that your repayments will then increase |
Term extension | The term of your mortgage is extended. This spreads the mortgage over a longer amount of time reducing the repayments. |
Capitalisation of arrears | All overdue repayments are added to the amount of your mortgage. Your mortgage repayments are then recalculated based on you repaying the mortgage amount plus the amount of missed repayments that have been added to it. This means that your repayments will increase |
Split mortgage | Your mortgage is split into two parts: - You make an interest-only payment on the first part.
- You make a capital-and-interest repayment on the second part.
Your capital and interest repayments clear the second part of the mortgage by the end of the mortgage term. The amount of capital (the actual loan) on the first part of the mortgage, which you only pay interest on, is not reduced over the term of the mortgage. You must pay it off in full at the end of the mortgage term. Please note: Before you enter into this arrangement you must identify how you expect to repay the part of the mortgage you are only paying interest on. |
Deferred interest | You pay only a percentage (no less than 66%) of the interest for an agreed length of time. The remaining interest is ‘deferred’ until the end of the agreed time. Your mortgage repayments are recalculated based on you paying off the mortgage amount plus the amount missed repayments that have been added to it. This means that your repayments will increase. |
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If we decide to offer you an alternative repayment arrangement, we’ll write to you setting out the terms and conditions of that arrangement. It’s very important that you fully understand the new arrangement before you go ahead with it. That’s why we recommend you get independent legal or financial advice (or both) before you make any decisions. If you, or your advisers, have any questions about the alternative repayment arrangement, contact us and we will be happy to discuss these with you.
Please note: An alternative repayment arrangement may reduce your mortgage repayments, but they will add to the overall cost of your mortgage over the term of the mortgage.