Interest-only or repayment?
Compare the monthly cost and the lifetime cost — and see what you’d still owe at the end on interest-only.
The mortgage
Side by side
Interest-only keeps payments low, but the full loan is still outstanding at the end — you need a separate plan (savings, investments or sale) to repay it, and you pay more interest overall because the balance never falls.
The £452 difference and what it defers
On £250,000 at 4.5%, interest-only costs £452 a month less than repayment. It also repays nothing: after 25 years the full £250,000 remains owed, £114,376 more interest has been paid along the way, and the loan needs settling by other means, sale, investments, or a repayment vehicle that was supposed to be growing all along. Interest-only rents the money; repayment buys it back month by month.
Where interest-only genuinely fits
Landlords use it deliberately: the lower payment maximises monthly cashflow, interest is the cost that matters against rent, and the sale of the property was always the exit. Some owner-occupiers with lumpy incomes, bonuses, business sales on the horizon, run interest-only with planned lump-sum repayments. The arrangement that goes wrong is the accidental one, where "for now" becomes fifteen years and the repayment plan is optimism. Lenders now demand evidence of a repayment strategy for owner-occupiers precisely because of how that era ended.
Pricing the middle ground
Part-and-part mortgages split the loan across both methods, and overpaying an interest-only loan voluntarily recreates a repayment mortgage with flexibility attached, the overpayment calculator shows what each £100 achieves. Compare full repayment costs with the mortgage calculator, and if the interest-only question is really a buy-to-let question, the buy-to-let analyser treats it in its natural habitat.
Common questions
What is the difference between interest-only and repayment?
On a repayment mortgage each payment clears some interest and some capital, so the balance falls to zero by the end. On interest-only you pay just the interest, so the payment is lower but the full loan is still owed at the end and must be repaid another way — from savings, investments or selling.
Why does interest-only cost more overall?
Because the balance never falls, you pay interest on the full loan for the whole term. A repayment mortgage shrinks the balance every month, so the interest shrinks too — meaning less total interest, in exchange for a higher monthly payment.
Who is interest-only for?
It’s common for buy-to-let, where landlords keep payments low and repay from the sale or refinancing, and occasionally for residential borrowers with a credible repayment plan. Residential interest-only is harder to get and lenders want proof of how you’ll clear the balance.
These results are estimates for general information only and are not financial advice. Property decisions have real consequences — check every figure and take appropriate professional advice before acting. Read the full disclaimer.