Interest-Only Mortgage Calculator

Interest-Only Mortgage Calculator UK

Make informed decisions about your mortgage with our comprehensive interest-only mortgage Calculator. Whether you're a first-time buyer, looking to remortgage, or considering buy-to-let investments, our calculator provides accurate comparisons between interest-only and repayment mortgages. Get instant calculations, visual payment breakdowns, and expert insights to help you choose the right mortgage option.

Instant Comparison

Compare interest-only vs repayment mortgages side by side with real-time updates.

Visual Insights

Interactive charts and graphs help you understand payment structures at a glance.

Expert Guidance

Access comprehensive guides and tips to make informed mortgage decisions.

Expert Guide

Understanding Interest-Only Mortgages

Make informed decisions about your mortgage options with our comprehensive guide to interest-only vs. repayment mortgages.

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Key Takeaways

Lower monthly payments but capital remains unchanged

Requires a solid repayment strategy

Suitable for specific financial situations

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Mortgage Types Compared

Interest-Only

Lower monthly payments
Capital due at term end
Flexible payment options
Investment opportunity

Repayment

Higher monthly payments
Gradual debt reduction
Clear repayment structure
Long-term security

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Repayment Strategies

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Investment Growth

Build an investment portfolio alongside your mortgage

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Property Sale

Plan to sell the property to repay the capital

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Savings Plan

Regular savings in high-interest accounts or ISAs

Quick Facts

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Term Length Typically 25-30 years
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Deposit Required Usually 25% or more
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Interest Rates May be higher than repayment

Frequently Asked Questions

What is the difference between an interest-only and repayment mortgage?

With an interest-only mortgage, your monthly payments only cover the interest on the loan, leaving the original amount borrowed unchanged. A repayment mortgage includes both interest and capital repayment, gradually reducing your debt over time. While interest-only mortgages offer lower monthly payments, you'll need a separate plan to repay the capital at the end of the term.

How can I qualify for an interest-only mortgage?

To qualify for an interest-only mortgage, lenders typically require: a significant deposit (usually 25% or more), a clear repayment strategy for the capital, a good credit score, and sufficient income to cover the payments. You'll also need to demonstrate how you plan to repay the loan at the end of the term through investments, savings, or property sale.

What are acceptable repayment vehicles for interest-only mortgages?

Common acceptable repayment vehicles include: investment portfolios, endowment policies, regular savings plans, pension lump sums, the sale of other properties, or the eventual sale of the mortgaged property (particularly for buy-to-let). Lenders will assess the viability of your chosen repayment strategy before approving an interest-only mortgage.

Can I switch from a repayment to an interest-only mortgage?

Yes, it's possible to switch from a repayment to an interest-only mortgage, but you'll need to meet your lender's criteria for interest-only borrowing. This includes having sufficient equity in your property and a credible repayment strategy. Some lenders may also allow partial interest-only arrangements.

How often should I review my interest-only mortgage?

It's recommended to review your interest-only mortgage and repayment strategy at least annually. This helps ensure your chosen repayment vehicle remains on track to repay the capital at the end of the term. Regular reviews also allow you to make adjustments if circumstances change or if your investments aren't performing as expected.

What happens at the end of an interest-only mortgage term?

At the end of an interest-only mortgage term, you'll need to repay the full original loan amount. This can be done through your chosen repayment vehicle, by selling the property, or by refinancing to a new mortgage. If you can't repay the capital, you may face having to sell your property to clear the debt.