What is the difference between interest only and repayment mortgage UK?

With a repayment mortgage, your monthly payments cover both interest and capital - you own the house outright at the end. With interest only, you only pay interest - the original debt remains and must be repaid separately at the end. Monthly payments are much lower with interest only, but you need a repayment strategy.

Is it better to have interest only or repayment mortgage UK?

For most homeowners, repayment is better as you automatically pay off the mortgage over time. Interest only has lower monthly payments but leaves the full debt at the end. Interest only can suit higher earners with solid repayment plans, landlords, or those with irregular income, but carries more risk.

Can you still get interest only mortgages UK 2024?

Yes, but criteria are strict. Lenders require proven repayment strategies (investments, pension lump sum, property sale, etc.), higher incomes, larger deposits (typically 25-50%), and often higher property values. Interest only is more common for buy-to-let properties than residential mortgages.

What happens at the end of an interest only mortgage UK?

The full original loan must be repaid. Options include selling the property, using savings/investments, remortgaging, switching to repayment for final years, or downsizing. If you can't repay, you may face repossession. Plan well ahead - a repayment strategy is essential.

Interest Only vs Repayment Mortgage UK: Complete Comparison

The choice between interest only and repayment mortgage fundamentally changes how much you pay each month and whether you’ll own your home outright. Here’s everything you need to know.

Quick Comparison

Feature	Repayment Mortgage	Interest Only Mortgage
Monthly payment	Higher	Lower
What you pay	Interest + capital	Interest only
At end of term	Own home outright	Full debt remains
Total interest paid	Less over term	More over term
Risk level	Lower	Higher
Availability	Widely available	Strict criteria
Equity building	Yes, from day one	No (only property value changes)

How Each Mortgage Works

Repayment Mortgage

Feature	Details
Monthly payment	Interest + part of loan
Balance	Reduces each month
End of term	£0 owed, own home outright
Early repayment	Faster if overpay

How Payments Change Over Time

Year	Interest Portion	Capital Portion	Balance
1	High	Low	Slight reduction
10	Medium	Medium	Significant reduction
20	Low	High	Approaching zero
25	Tiny	Maximum	£0

Interest Only Mortgage

Feature	Details
Monthly payment	Interest only
Balance	Stays the same
End of term	Full original loan owed
Repayment	Need separate plan

Payment Structure

Element	Interest Only	Repayment
Pay interest	Yes	Yes
Pay principal	No (separately)	Yes (together)
Build equity through payments	No	Yes

Payment Comparison

£250,000 Mortgage, 25 Years, 5% Interest

Type	Monthly Payment	Total Paid	Interest Paid
Repayment	£1,461	£438,300	£188,300
Interest Only	£1,042	£312,600 + £250,000 repayment	£312,600
Difference	£419/month less	–	£124,300 more

Monthly Savings with Interest Only

Loan Amount	Repayment	Interest Only	Monthly Difference
£150,000	£877	£625	£252
£200,000	£1,169	£833	£336
£250,000	£1,461	£1,042	£419
£300,000	£1,753	£1,250	£503
£400,000	£2,338	£1,667	£671

But remember: With interest only, you still owe the full amount at the end.

Total Cost Analysis

True Cost Over 25 Years

Element	Repayment	Interest Only
Original loan	£250,000	£250,000
Total interest	£188,300	£312,600
Loan still owed at end	£0	£250,000
Total cost	£438,300	£562,600
Difference	–	£124,300 more

What Interest Only Savers Must Do

The £419/month saving must be invested to build the £250,000 repayment fund:

Monthly Investment	Growth Rate	After 25 Years
£419	0%	£125,700 (shortfall)
£419	4%	£233,400 (shortfall)
£419	6%	£290,400 (covers it)
£419	8%	£362,600 (surplus)

Risk: Investment returns aren’t guaranteed you might not reach £250,000.

Eligibility Comparison

Repayment Mortgage

Requirement	Details
Deposit	Typically 5-25%
Income	Affordable monthly payment
Credit history	Varies by lender
Availability	Most lenders, most borrowers

Interest Only Mortgage

Requirement	Details
Deposit	Typically 25-50%
Income	Often higher thresholds
Loan-to-value	Usually max 75%
Repayment strategy	Must demonstrate
Property value	Often minimum ~£300,000+
Availability	Limited lenders, strict criteria

Acceptable Repayment Strategies

Strategy	Details
Investments	ISA, investment portfolio
Pension lump sum	25% tax-free cash
Property sale	Sell this or another property
Endowment	Legacy policies (rare now)
Bonus/income	Very high earners only
Sale and downsize	For older borrowers

Not acceptable: “Hope property value rises.”

Pros and Cons

Repayment Mortgage Pros

Pro	Details
Build equity	Own more each month
Certainty	Know you’ll own outright
Lower total cost	Less interest long-term
Automatic	No separate investment needed
Lower risk	Clear path to ownership

Repayment Mortgage Cons

Con	Details
Higher monthly payment	Tighter cash flow
Less flexibility	Larger committed expense
Equity tied up	Money locked in property

Interest Only Pros

Pro	Details
Lower payments	More monthly cash flow
Investment potential	Invest difference for growth
Cash flexibility	Money available elsewhere
Tax-efficient	For buy-to-let (interest deductible)

Interest Only Cons

Con	Details
Full debt remains	Must repay somehow
No automatic equity	Don’t build ownership
Higher total cost	More interest over time
Investment risk	Might not hit target
Harder to get	Strict criteria
Time bomb	End of term arrives

Who Should Choose Each

Repayment Mortgage Best For

Situation	Why
First-time buyers	Start building equity
Want certainty	Know you’ll own it
Not investment confident	No separate strategy needed
Standard employment	Regular income
Risk-averse	No end-of-term stress
Long-term home	Building towards ownership

Interest Only Potentially Suits

Situation	Why
Buy-to-let landlords	Lower costs, interest tax-deductible
High earners	Can genuinely invest the difference
Near retirement	Plan to downsize/use pension
Wealthy with assets	Have repayment strategy
Short-term only	Selling within years

Warning: Interest only needs discipline and a genuine plan.

The Buy-to-Let Exception

Why Interest Only for Landlords

Factor	Details
Lower payments	Better cash flow
Interest deductible	Tax-efficient (restricted)
Rent covers costs	Tenant pays interest
Sale at end	Common exit strategy
Property often appreciates	Covers (or exceeds) loan

Example BTL Interest Only

Element	Value
Property value	£200,000
Mortgage (75% LTV)	£150,000
Interest only payment (5%)	£625/month
Rent received	£900/month
Cash flow	+£275/month

At end: Sell property (hopefully appreciated), repay mortgage, keep profit.

Part Repayment, Part Interest Only

Hybrid Option

Some lenders offer split mortgages:

Portion	Type	Monthly
£150,000	Repayment	£877
£100,000	Interest only	£417
Total	–	£1,294

vs full repayment on £250,000: £1,461

Benefits of Split

Benefit	Details
Lower payments	Than full repayment
Some equity built	Through repayment portion
Smaller end debt	Only interest portion owed
Flexibility	Balance risk and cost

Switch Options

Repayment to Interest Only

When Possible	Considerations
Financial difficulty	Temporary reduction
Cash flow need	Lower payments
Lender agreement	Must qualify

Interest Only to Repayment

When Common	Considerations
Before term ends	Build equity
Circumstances improve	Pay down loan
Repayment strategy fails	Safety net
Remortgage	New deal changes type

End of Term: Interest Only Reality

What Happens at Term End

Scenario	Outcome
Have funds	Pay off mortgage
Sell property	Use proceeds to repay
Downsize	Buy smaller, clear debt
Remortgage	If equity and qualify
Can’t repay	Potential repossession

Planning Ahead

Action	When
Review repayment strategy	Annually
Check investment performance	Regularly
Contact lender	10+ years before end
Professional advice	Well before term ends

Making the Decision

Choose Repayment If:

You want certainty of owning home
You don’t want investment responsibility
Monthly payment is affordable
You’re risk-averse
This is your main home

Consider Interest Only If:

You have a solid repayment strategy
You’re a buy-to-let investor
You’re high earner who will invest difference
You plan to sell/downsize
You have large pension lump sum coming
You can meet strict lender criteria

Summary

Factor	Repayment	Interest Only
Monthly cost	Higher	Lower
Total cost	Lower	Higher
End of term	Own home	Owe full amount
Risk	Lower	Higher
Availability	Easy	Strict
Best for	Most people	Specific situations

Key points:

Repayment is safer and suits most homeowners
Interest only has lower payments but debt remains
Interest only requires genuine repayment strategy
Buy-to-let commonly uses interest only
Total cost higher with interest only
Part and part offers middle ground
Review your situation before choosing

For more guidance:

Mortgage Types UK 2026 — Fixed, Tracker, Offset, Interest-Only Explained

Contents

Quick Comparison

How Each Mortgage Works

Repayment Mortgage

How Payments Change Over Time

Interest Only Mortgage

Payment Structure

Payment Comparison

£250,000 Mortgage, 25 Years, 5% Interest

Monthly Savings with Interest Only

Total Cost Analysis

True Cost Over 25 Years

What Interest Only Savers Must Do

Eligibility Comparison

Repayment Mortgage

Interest Only Mortgage

Acceptable Repayment Strategies

Pros and Cons

Repayment Mortgage Pros

Repayment Mortgage Cons

Interest Only Pros

Interest Only Cons

Who Should Choose Each

Repayment Mortgage Best For

Interest Only Potentially Suits

The Buy-to-Let Exception

Why Interest Only for Landlords

Example BTL Interest Only

Part Repayment, Part Interest Only

Hybrid Option

Benefits of Split

Switch Options

Repayment to Interest Only

Interest Only to Repayment

End of Term: Interest Only Reality

What Happens at Term End

Planning Ahead

Making the Decision

Choose Repayment If:

Consider Interest Only If:

Summary

Related Guide

Sources