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Find out exactly what your monthly interest-only mortgage payment will be — and compare it side-by-side with a full capital repayment mortgage.
Commonly used for buy-to-let, bridging finance, and some residential mortgages. Results are illustrative only — always seek independent advice.
Enter your loan details below. Toggle the comparison to see interest only vs repayment side by side.
With an interest-only mortgage, your monthly payment only covers the interest charged — you are not reducing the capital you owe. Understanding the implications is essential before choosing this type of mortgage.
Because you are only paying the interest each month, your payment is always lower than a repayment mortgage on the same loan at the same rate. This can significantly improve your monthly cash flow — which is why interest only is popular with buy-to-let landlords assessing rental yield.
The key difference: at the end of your mortgage term, you still owe the full original loan amount. Lenders will require you to demonstrate a credible repayment vehicle — such as savings, investments, a pension lump sum, or sale of the property — before approving an interest-only mortgage.
Because you are not reducing the loan balance over time, you pay interest on the full loan amount for the entire term. Total interest paid on an interest-only mortgage will always exceed the total interest paid on a repayment mortgage over the same period, all else being equal.
Interest-only mortgages serve specific purposes. Here are the most common scenarios where they are used — and what to consider in each case.
The most common use. Landlords often choose interest only to maximise monthly cash flow and rental yield. The expectation is that property value appreciation and eventual sale of the asset will repay the loan. Lenders will assess rental income coverage ratios.
Bridging loans are almost always interest only, charged on a monthly basis. They are designed for short-term use — typically between 1 and 24 months — where a borrower needs fast access to funds before a longer-term solution is in place.
Some residential borrowers choose interest only where they have a clear, credible repayment plan — such as an endowment policy, ISA savings strategy, or investment portfolio. Strict lender criteria applies and not all lenders offer this product for residential use.
Portfolio landlords and property investors using a limited company structure (Special Purpose Vehicle) commonly use interest-only commercial mortgages to manage company cash flow efficiently and maximise tax efficiency.
Retirement Interest Only (RIO) mortgages are designed for older borrowers who cannot satisfy the affordability criteria for a standard repayment mortgage. The loan is repaid on death, entry into long-term care, or sale of the property.
A practical middle ground: part of the mortgage on a repayment basis, and part on an interest-only basis. This reduces monthly payments vs full repayment, while still gradually reducing some of the capital debt over the term.
About interest-only mortgages and how they work.
Yes, interest-only mortgages are still available in the UK, but criteria tightened significantly after the 2008 financial crisis. For residential borrowers, lenders typically require a minimum income (often £75,000+), a minimum equity or deposit (often 25–50%), and proof of a credible repayment vehicle. For buy-to-let mortgages, interest only remains widely available and is the most common structure used by landlords.
Lenders require you to demonstrate how you will repay the loan at the end of the term. Acceptable repayment vehicles vary by lender but commonly include: sale of the property (most commonly accepted for buy-to-let), an endowment or investment policy, a stocks and shares ISA or investment portfolio, a pension lump sum, sale of another property, or an inheritance. Vague plans or insufficient projected fund values are typically rejected. An adviser can help you identify which vehicles will satisfy which lenders.
At the end of the term, you must repay the full original loan amount. If your repayment vehicle has performed as planned, you will have sufficient funds to do so. If not, you may need to sell the property, remortgage to a repayment product, or seek other arrangements. It is crucial to review your repayment vehicle regularly — ideally annually — to ensure it remains on track to meet the loan balance.
Monthly payments are lower with interest only — but the total cost over the full term is almost always significantly higher. Because you never reduce the loan balance, you pay interest on the full amount for the entire term. With a repayment mortgage, the outstanding balance reduces each month so the total interest paid decreases over time. Use the comparison toggle in the calculator above to see the difference for your specific figures.
Yes. Most lenders allow you to switch from interest only to a repayment (or part-and-part) basis at any point during your mortgage term. You would need to pass affordability checks, as your monthly payments will increase. Switching part way through the term is a sensible way to reduce capital debt and bring down your total interest bill. An independent adviser can review your current deal and identify the best options available to you.
The calculator uses the standard interest-only formula (monthly payment = loan × annual rate ÷ 12) and is mathematically accurate for the inputs you provide. However, it is for illustrative purposes only. Your actual rate will depend on your loan-to-value, income, employment type, credit profile, and which lender you use. The rate you see in this calculator is not a quote or a mortgage offer. Always obtain formal advice from a qualified, FCA-regulated adviser before making any financial decision.
Jagpal Singh is an independent, whole-of-market mortgage adviser with over 10 years' experience. He searches 90+ lenders to find the most competitive deal for your circumstances — whether interest only, repayment, or part-and-part.