Use this interest only mortgage calculator to see your monthly payment if you pay only the interest, and how it compares with a repayment mortgage. It also shows the total interest each option costs over the term.
Interest-only vs repayment
- Interest-only a month
- –
- Repayment a month
- –
- Total interest (interest-only)
- –
- Total interest (repayment)
- –
On £200,000 at 4.5% over 25 years, interest only costs £750.00 a month and repayment costs £1,111.66. Interest only is £361.66 a month cheaper, but at the end you still owe the full £200,000.
How an interest only mortgage works
Each month you pay only the interest on what you borrowed. The balance does not go down, so at the end of the term you must repay the whole loan in one go. Lenders will want to see a credible plan for doing that before they agree to lend.
Monthly interest-only payment = loan × interest rate ÷ 12
For example, £200,000 × 4.5% = £9,000 a year, or £750 a month. With a repayment mortgage, part of each payment also reduces the balance, so the payment is higher but the loan is cleared by the end.
Interest only vs repayment: payment comparison
| Loan | Interest only a month | Repayment a month | Total interest (interest only) | Total interest (repayment) |
|---|---|---|---|---|
| £100,000 | £375.00 | £555.83 | £112,500 | £66,750 |
| £150,000 | £562.50 | £833.75 | £168,750 | £100,125 |
| £200,000 | £750.00 | £1,111.66 | £225,000 | £133,499 |
| £300,000 | £1,125.00 | £1,667.50 | £337,500 | £200,249 |
| £400,000 | £1,500.00 | £2,223.33 | £450,000 | £266,999 |
Interest only has lower monthly payments but more total interest, because the balance never falls. The interest only mortgage calculator shows both totals so you can compare the true cost.
Ways to repay the loan at the end
Lenders accept a range of repayment plans, according to MoneyHelper. Common ones are:
- Investments such as an ISA or a pension lump sum, built up over the term.
- Selling the property and moving somewhere cheaper. Many lenders only accept this if you have plenty of equity.
- Selling another property, such as a buy to let.
- Switching to repayment part-way through, which raises your payments but clears the loan.
If you are not sure how you will repay, speak to your lender early. Lenders are expected to help customers who may struggle to repay at the end of their term.
Interest only mortgage calculator: rates compared
Because the payment is just the interest, the rate has a direct effect. On £200,000, every 1% on the rate adds £166.67 a month:
| Rate | Interest only a month | Interest only a year |
|---|---|---|
| 3.5% | £583.33 | £7,000 |
| 4% | £666.67 | £8,000 |
| 4.5% | £750.00 | £9,000 |
| 5% | £833.33 | £10,000 |
| 5.5% | £916.67 | £11,000 |
| 6% | £1,000.00 | £12,000 |
Use the interest only mortgage calculator above with your own rate. When a fixed deal ends, check the new payment before it starts, because interest-only payments jump straight away when rates rise.
Building a repayment plan
If you plan to repay with savings or investments, work out how much you need to put aside each month. To have £200,000 in 25 years, you would need to save about £667 a month with no growth at all. With investment growth you may need less, but returns are not guaranteed, so check your plan every year.
Many people combine methods: an ISA for part of the loan, then downsizing or a pension lump sum for the rest. Write the plan down and share it with your lender when asked.
Part interest only, part repayment
Some lenders let you split the mortgage. On £200,000 with £100,000 interest only and £100,000 repayment at 4.5% over 25 years, you would pay about £930.83 a month and owe £100,000 at the end. Run each half through the interest only mortgage calculator and add them together.
Who can get an interest only mortgage?
Interest only home mortgages are harder to get than repayment ones. Lenders usually want a deposit of at least 25%, a good income and an acceptable repayment plan. They are most common for:
- Buy to let landlords, who often repay by selling the property. See the buy to let mortgage calculator.
- Older borrowers using a retirement interest-only mortgage, repaid when the home is sold. See the lifetime mortgage calculator for the equity release side.
- People with large expected lump sums, such as a bonus or an inheritance.
Interest only mortgage calculator UK: pros and cons
| Pros | Cons |
|---|---|
| Lower monthly payments | You still owe the full loan at the end |
| More cash each month for saving or investing | More total interest over the term |
| Useful for landlords and short-term borrowing | Harder to get; needs a repayment plan |
| Can switch to repayment later | If house prices fall, selling may not clear the debt |
Lowering your interest-only balance
Any overpayment on an interest-only mortgage reduces the balance you owe at the end, and also lowers your monthly interest. Use our mortgage overpayment calculator to see the effect of regular overpayments on a repayment loan, or the mortgage interest calculator to see interest year by year.
Interest only into retirement
If your interest-only term ends near retirement, plan early. Your income may fall, which makes remortgaging harder. Options include a retirement interest-only mortgage, where you keep paying interest and the loan is repaid when the home is sold, or using part of your pension tax-free lump sum to clear some of the debt.
Use the interest only mortgage calculator to check whether the monthly interest would still be affordable on your expected retirement income.
Frequently asked questions
How do I calculate interest only mortgage payments?
Multiply the loan by the yearly interest rate and divide by 12. £150,000 at 5% is £7,500 a year, or £625 a month. The interest only mortgage calculator does this for you.
Is interest only cheaper than repayment?
Each month, yes. Over the whole term, no: you pay more interest and still have to repay the loan itself.
Can I switch from interest only to repayment?
Usually yes, subject to your lender checking you can afford the higher payments. Changing during a fixed deal may have a fee.
What happens if I cannot repay at the end?
Talk to your lender as early as possible. Options can include extending the term, switching to repayment or selling the property. Free debt advice is available from MoneyHelper.
About this calculator
This interest only mortgage calculator uses the simple interest formula for interest-only payments and the standard repayment formula for comparison. It assumes your rate stays the same for the term. Results are estimates; your lender will confirm exact figures.