Interest-only calculator

Interest-only keeps the monthly payment down because none of it repays the loan. This shows the trade-off against a repayment mortgage.

The catch

At the end of the term the whole loan is still owed and has to be repaid, typically by selling the property or from savings or investments. FCA rules require a lender offering interest-only to check that you have a credible strategy to repay the capital (FCA Handbook, MCOB 11.6).

Worked examples

Loan	Interest-only	Repayment	Difference	Total interest, interest-only	Total interest, repayment
£200,000 at 4.5% over 25 years	£750 a month	£1,112 a month	£362	£225,000	£133,500
£300,000 at 5% over 25 years	£1,250 a month	£1,754 a month	£504	£375,000	£226,100
£150,000 at 4% over 20 years	£500 a month	£909 a month	£409	£120,000	£68,200

In the first row the interest-only borrower pays £362 a month less, but £91,500 more interest over the term and still owes £200,000 at the end. The repayment borrower owns the home outright. Interest-only is cheaper month to month and more expensive overall.

What lenders accept as a repayment strategy

Each lender publishes its own list. Commonly accepted: sale of the mortgaged property where there is enough equity (many lenders require a minimum equity, often £200,000–£300,000, so this route is mostly for higher-value homes); sale of another property you own; an endowment, ISA or investment portfolio with a realistic projected value; a pension lump sum (lenders usually take only a portion of the projected tax-free cash); and sometimes a combination. "I'll remortgage later" or "I'll downsize" without evidence isn't normally enough. Lenders also tend to require a lower maximum loan-to-value for interest-only, commonly 50–75%, and a higher minimum income.

Who interest-only suits

Buy-to-let landlords. The standard structure for rental property: interest is the business cost and the plan is to sell or remortgage. See the buy-to-let guide.
Higher earners with irregular income who overpay in good years; see overpaying and offset mortgages.
Borrowers with a defined future lump sum, such as a pension tax-free cash entitlement or an inheritance already in trust.
Older borrowers through a retirement interest-only (RIO) mortgage, where the loan is repaid when the home is sold on death or a move into care and affordability is tested on the interest alone; see the later life guide.

Part-and-part

Some lenders let you split the loan: part on repayment, part on interest-only. It lowers the monthly payment compared with full repayment while reducing the sum still owed at the end. On the £200,000 example, half-and-half gives a payment of roughly £931 a month and £100,000 outstanding at the end of the term.

Common questions

Can I switch from interest-only to repayment later?

Usually yes, and lenders tend to welcome it. The payment rises to the repayment level for the remaining term; with fewer years left, that rise is steep. Switching early is much cheaper than switching late.

What happens if I can't repay at the end?

The lender is required to contact you well before the end date and discuss options, which may include a term extension, a switch to repayment, a later-life product or sale. Ignoring the letters is the worst option; the FCA expects lenders to treat borrowers reaching term fairly.

Is interest-only cheaper?

Per month, yes. Over the mortgage, no: you pay interest on the full balance every month for the whole term, which is why the total interest in the examples above is roughly 70% higher.

Sources checked 13 October 2026.

Other calculators

Estimates only, not advice. These calculators do arithmetic on the numbers you enter. They don't check your credit file, apply a lender's affordability rules or know which products you qualify for. Nothing you type is stored or sent anywhere. For a figure you can act on, speak to an FCA-authorised mortgage adviser.