What is an interest-only mortgage?
An interest-only mortgage charges you only the interest each month. The amount you borrowed stays outstanding and has to be repaid in full at the end of the term, usually from savings, investments or the sale of the property. Monthly payments are lower than a repayment mortgage at the same rate, and the total interest is higher because the balance never falls.
High-street lenders are strict with owner-occupiers. They typically want a high income, a large deposit and a credible plan for repaying the capital. Interest-only is much more common on buy-to-let, where the loan is often repaid by selling the property. This calculator shows the monthly interest and the capital you would still owe. It does not decide whether a lender will offer the loan.
A £250,000 interest-only mortgage at 5% costs £1,042 per month — £312,500 in total interest over 25 years, with the full £250,000 still owed at the end.
Interest-only vs repayment
Interest-only
- Monthly: loan × rate ÷ 12
- Balance: unchanged
- Needs a repayment vehicle
- Common for BTL, over-55s, high-net-worth
Repayment (capital & interest)
- Monthly: calculated to clear over the term
- Balance: reduces to zero by term end
- No separate repayment plan needed
- Standard for residential owner-occupiers
Frequently asked questions
How do interest-only mortgages work?
You pay only the interest each month, not the capital. The full loan balance remains outstanding and must be repaid in full at the end of the term, usually via a separate repayment vehicle (ISA, pension, property sale).
Can I get an interest-only residential mortgage in the UK?
Yes, but high-street lenders are strict. You typically need a minimum £50–£100k income, high equity (often 50% LTV cap) and a credible repayment plan. Specialist lenders are more flexible, especially for over-55s.
Are BTL mortgages interest-only?
Most UK buy-to-let mortgages are interest-only — it maximises tax efficiency and cash flow. The sale of the property typically repays the loan.
What repayment vehicles do lenders accept?
Common options: ISA/investment portfolio, pension lump sum, sale of a second property, sale of the mortgaged property (mostly downsizing). Endowments are largely extinct.
Is interest-only cheaper than repayment?
The monthly payment is lower, but the total cost is usually higher because you never reduce the capital. You also need to fund the repayment vehicle alongside.
Reviewed by the Mortgage118 editorial team. Interest-only mortgages require a credible repayment plan; lenders assess this as part of underwriting. This calculator provides an estimate only and does not constitute mortgage advice.
- Type
- Pure interest-only
- Balance trajectory
- Flat — no capital paid
- Repayment vehicle
- Required separately