This calculator shows you what you could pay each month with an interest-only mortgage.
It’s designed to be quick and simple – just pop in your loan amount and the interest rate, and you’ll see your monthly payment figure right away.
Whether you’re weighing up different mortgage options, planning a buy-to-let purchase, or just curious about interest-only costs, our calculator gives you instant figures to work with.
You can try different amounts and rates to see how they affect your monthly payments.
Why Don’t We Ask for a Mortgage Term?
For interest-only mortgages, the monthly payment stays exactly the same throughout your mortgage term.
Here’s why: you’re only paying the interest charges each month, and these are worked out as a yearly percentage of your loan amount, then split into 12 equal payments.
Say you borrow £400,000 at 5% interest:
- The yearly interest is £20,000 (5% of £400,000)
- Your monthly payment is £1,667 (£20,000 divided by 12)
Whether your mortgage term is 5 years or 25 years, that monthly payment won’t change unless your interest rate changes.
What Is an Interest-Only Mortgage?
An interest-only mortgage means you only pay the interest charges each month, without paying off any of the actual loan amount.
Your monthly payments are smaller than with a standard repayment mortgage, but the amount you borrowed stays the same.
Think of it like this: if you borrow £400,000 on interest-only, you’ll still owe £400,000 at the end of the mortgage term – even after making all your monthly payments.
You’ve only been paying the interest that the lender charges for lending you the money.
Read more: Interest only mortgage guide
Are Interest-Only Mortgages Easy to Get?
Getting an interest-only mortgage is more challenging than a standard repayment mortgage.
Lenders need to be extra careful because you’re not paying off the loan as you go along.
Most lenders want to see:
- A bigger deposit (usually at least 25%)
- A clear strategy for how you’ll repay the loan at the end
- Higher income requirements
- Evidence of assets or investments
- A good credit history
Buy-to-let interest-only mortgages are usually easier to get than residential ones, as lenders see rental income as a way to cover the monthly payments.
Related reading: Can I change my mortgage to interest only?
What Happens at the End of an Interest-Only Mortgage?
At the end of your mortgage term, you’ll need to repay the full amount you borrowed.
Here’s what typically happens:
- Your lender will contact you as the end date gets closer
- You’ll need to put your repayment plan into action, which might mean:
- Selling the property
- Using investments that have matured
- Switching to a repayment mortgage
- Using savings you’ve built up
- Downsizing to a smaller property
If you can’t repay the full amount, you’ll need to speak with your lender well before the end date.
They might offer options like:
- Extending your mortgage term
- Converting to a repayment mortgage
- Looking at part-repayment options
Read more: What happens when my interest only mortgage ends?
What Other Repayment Methods Are There?
When you take out a mortgage, you have three main choices for how to repay it.
Let’s look at each one:
Repayment (Capital and Interest)
This is the most common way to repay a mortgage.
Each month, you pay back some of the loan amount plus the interest. Your payments are higher than interest-only, but by the end of the term you’ll have paid off everything.
The early years of a repayment mortgage mainly go towards paying interest, with more of each payment going towards the loan amount as time goes on.
Interest-Only
As we’ve covered above, you only pay the interest each month.
If you borrow £400,000, you’ll still owe £400,000 at the end of the term. Your monthly payments are lower, but you need a solid plan to repay the full loan amount.
Part and Part
A ‘part and part‘ mortgage is a mix of both methods above.
You split your loan into two parts – one part on interest-only and one part on repayment. For example, with a £400,000 mortgage, you might have £200,000 on repayment and £200,000 on interest-only.
This gives you lower monthly payments than a full repayment mortgage, but you’ll still need a plan to pay off the interest-only portion at the end.
Read more: What are the different mortgage repayment methods?
Each method has its uses and risks. Interest-only suits people with a clear repayment plan, repayment offers the security of paying off your loan gradually, and part and part can be a good middle ground if you want a mix of both.
