Interest-Only vs Repayment Mortgages: Which Should You Choose?
Understanding the key differences to make the right decision for your circumstances.
Should I choose an interest-only or repayment mortgage?
Repayment mortgages guarantee you own the property at term end—most buyers should choose this. Interest-only has lower monthly payments but requires a separate capital repayment plan. Interest-only is mainly used by buy-to-let landlords, those with substantial investments, or borrowers needing affordability flexibility.
Helping you choose the right mortgage structure.
Should I choose an interest-only or repayment mortgage?
Repayment mortgages guarantee you own the property outright at the end of the term - most buyers should choose this. Interest-only mortgages have lower monthly payments but require a separate plan to repay the capital. Interest-only is now mainly used by buy-to-let landlords, those with substantial investments, or borrowers needing affordability flexibility.
Key Facts: Interest-Only vs Repayment
- •Repayment: You pay off the full loan over the term and own your home outright
- •Interest-only: Lower payments but you still owe the full amount at the end
- •Repayment costs more monthly but builds equity every payment
- •Interest-only requires a credible repayment strategy (investments, savings, property sale)
- •Most residential lenders now require 50% LTV or lower for interest-only
Repayment
Each payment covers interest plus capital. By the end of your term, you own your home outright with nothing to repay.
Interest-Only
You only pay the interest each month. The original loan amount remains and must be repaid at term end.
Feature-by-Feature Comparison
Compare key features of repayment and interest-only mortgages.
| Feature | Repayment | Interest-Only |
|---|---|---|
| Monthly payment amount | Higher | Lower |
| Loan cleared at end of term | ||
| Builds home equity monthly | ||
| Total interest paid over term | Lower | Higher |
| Repayment strategy required | ||
| Lender availability | All lenders | Limited lenders |
| Typical LTV maximum | 95% | 50-75% |
| Risk if property value falls | Lower | Higher |
| Suitable for first-time buyers | ||
| Popular with buy-to-let | Less common | Very common |
Payment Example: £200,000 over 25 years at 5%
Repayment
- Monthly payment: £1,169
- Total interest: £150,700
- Owed at end: £0
Interest-Only
- Monthly payment: £833
- Total interest: £250,000
- Owed at end: £200,000
*Illustrative example only. Actual payments depend on your rate and term.
When to Choose Repayment
Buying your home to live in
Most residential buyers should choose repayment for security.
First-time buyer
Interest-only options are very limited for first-time buyers.
Want to own outright
Repayment guarantees you'll own your home mortgage-free.
No separate repayment plan
If you don't have investments or a clear strategy.
When Interest-Only May Work
Buy-to-let investor
Maximise rental yield with lower payments; sell property to repay.
Substantial investments
If investments can grow to repay the capital and outperform interest.
High equity / low LTV
With 50%+ equity, more lenders offer interest-only options.
Planning to downsize
If you'll sell and buy a cheaper property, releasing equity.
People Also Ask
Need help deciding?
Get personalised advice on which mortgage type suits you
Frequently Asked Questions
Interest-Only Guide
Full guide to interest-only mortgages and criteria.
Buy-to-Let Mortgages
Landlord mortgages where interest-only is common.
Mortgage Calculators
Compare repayment vs interest-only costs.
Your home may be repossessed if you do not keep up repayments on your mortgage.