Interest-Only Mortgage Calculator
Compare interest-only and repayment mortgage monthly costs and total amounts paid.
Important: your loan balance does not reduce
With an interest-only mortgage, your loan balance does not reduce over the term. You must have a credible repayment strategy in place — for example, investments, a pension lump sum, or a planned property sale. Most UK lenders require evidence of this strategy before approving an interest-only mortgage.
Mortgage details
Monthly cost comparison
Interest-only
Pays interest only — capital unchanged
£750.00
Repayment equivalent
Capital reduces to £0 over term
£1,111.66
Monthly saving vs repayment
£361.66
Total interest over 25 years
£225,000
Interest only — no capital repaid
Capital still owed at end of term
£200,000
Full loan amount — must be repaid in full
Who are interest-only mortgages suitable for?
Interest-only mortgages were once common for residential buyers in the UK, but the FCA significantly tightened rules following the 2008 financial crisis, when many borrowers reached the end of their term with no means to repay the capital. Today, they are mainly used by buy-to-let landlords, high-net-worth individuals, and borrowers with large assets but irregular income (such as business owners).
What the FCA requires lenders to verify
Under FCA rules, lenders offering residential interest-only mortgages must verify that the borrower has a credible and evidenced repayment strategy. Acceptable strategies typically include the planned sale of the mortgaged property, the sale of another property, an endowment policy, a Stocks and ISA investment portfolio, or a pension lump sum. The lender must be satisfied that the strategy is realistic and that the projected value is sufficient to clear the loan.
The key risk
The lower monthly cost of an interest-only mortgage comes at a significant price: over a 25-year term, you pay substantially more total interest than on a repayment mortgage, and you still owe the entire original loan at the end. If your repayment vehicle — investments, property — performs worse than expected, you may face a shortfall. This calculator helps illustrate that trade-off clearly before speaking with a qualified adviser.
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Disclaimer: This calculator is for illustrative purposes only and does not constitute financial advice. Always speak to a qualified, FCA-authorised mortgage adviser before making financial decisions.