New Mortgage Guides

Other Mortgage Guides

Mortgage Types

Mortgage Tools

Financial Services > Mortgages > Interest Only Mortgages > Interest Only Mortgages

Interest-only mortgages

Interest-only mortgages

 

You can repay a mortgage in two ways: Interest-only or repayment (sometimes called capital and repayment).

How do they work?

With a repayment mortgage, you pay back both the amount you originally borrowed and the interest.

With an interest-only mortgage, you just pay interest. And because you are only paying back interest, the monthly payments are lower than on repayment mortgages.

However, if you've got an interest-only loan, remember that once the mortgage matures you'll still have to pay back the original amount you borrowed.

How do I repay the amount borrowed?

It's best to have a plan as to how you'll do this when you take out the mortgage: Consider monthly payments into an ISA, which - if invested sensibly - should grow by enough over the term of the mortgage to repay it.

However, there are no guarantees this will happen. Whereas with a repayment mortgage, you know that as long as you keep up payments, your mortgage will be paid off at the end of the term.

Are interest-only mortgages popular?

Millions of homeowners have them, and many do not have any repayment vehicles in place to repay the principle.

This is worrying regulators and lenders, and many now are demanding borrowers show they have a repayment plan before they will advance interest-only loans.

So which is better, repayment or interest only?

Interest-only may be cheaper in the short-term, but unless you are in a financial fix, have substantial savings or have a good repayment plan in place, the repayment route is preferable.

Receive Mortgage Advice from a Regulated Advisor

Mortgage advice

There is no better time to be seeking suitable mortgage advice from a Regulated mortgage advisor

Submit your details today for an obligation-free chat and a regulated mortgage advisor will call you back to help you find the mortgage that best fits your needs.

We will only provide your details to one regulated advisor.

Your mortgage

 * Help
 * Help
 * Help
 Help
 Help
 *

About you

 *
 *
 *
 *
 *
 *
 *

Questions marked with * are required

Please be aware that the advisor who contacts you will be a third party advisor who has no connection with us. There is no charge to you for using this service. We are paid by charging your assigned advisor a fee for this service. Any advice or assistance given to you by a third party advisor does not represent our advice or assistance and is not checked or endorsed by us. It is your decision whether or not you act on any advice or assistance you are given.

By clicking “Proceed” you confirm that:

  • You accept our Terms of use and
  • You would like to be contacted by a regulated third party advisor to discuss your needs.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Financial Services Net Limited and other trusted 3rd parties would like to keep you advised via e-mail or telephone of products, services and other exciting offers we think may interest you. Please untick this box if you do not consent to us contacting you for further information.

news news rss
Mortgages News

Mortgage approvals up by 33% at mutuals

Leeds pulls lowest-ever 1.99% deal after less than a month

First direct slashes rates by up to 0.5%

       
Mortgage lenders
   

Browse mortgage lender offersMortgage Rates by Lender

  • Browse current mortgage offers from over 90 lenders.

Worried about mortgage repayments?Worried about Mortgage Repayments?

  • Join our petition to Government to bail out burdened individuals, not just banks.

Free mortgage quoteFree Mortgage Quote

Mortgages in Scotland Mortgages in Scotland

Equity releaseEquity Release

  • Unlock equity in your home.

Switching mortgagesSwitching Mortgages

Home reversion plansHome Reversion Plans

Commercial mortgages Commercial Mortgages

  • Commercial property loans
  • Starting a business?

Arrears & CCJs?

  • Remortgages
  • Sub prime mortgages
  • Arrears, CCJs
  • Self certification
  • Debt consolidation

Protect your mortgageProtect Your Mortgage

  • 3 months free mortgage protection cover

Mortgage Newsletter