19 May 2023
About Interest Only Mortgages
An interest only mortgage will allow you to make monthly payments just to cover the interest on the money you have borrowed. Unlike a traditional repayment mortgage where payments consist of both capital and interest, with an interest-only mortgage, you will only pay the interest and the balance of the loan will therefore not decrease.
There are various reasons why an interest only mortgage may be appealing:
- Lower monthly payments: this means the loan would be more affordable on a monthly basis
- Short-term purchase: the borrower may be planning to sell the property in the short term and downsize to a cheaper property
- Investment purposes: the borrower could be planning to invest the money that would be used to pay the capital payments elsewhere
Risks and considerations
- Balance of mortgage will remain outstanding at the end of the term: as you are only paying the interest on the mortgage, the mortgage balance will remain the same and will be repayable at the end of the term
- Equity Building: as no capital is being paid during the term of the mortgage, the equity for the borrower will not increase unless the property value increases. This means they may have less equity available for the future, which could be problematic if the value of the property decreases
- Interest Rate Adjustments: if the interest rate loan is variable, borrowers may find their monthly payments increase if mortgage rates rise
- You will not fully own your own home at the end of the term: A lender will require you to pay the mortgage balance at the end of the term. This may mean you need to sell your property to repay the loan
- Investment Returns: if you choose to invest your capital repayments in an investment policy, the growth may not be enough to repay your mortgage at the end of the term
- Part interest only and part repayment: Many lenders will offer a two-part loan which means you can have part of the mortgage on interest only and part on repayment. This allows you to build up some equity in your property whilst keeping your monthly payment low
Interest-only mortgages may not suit everyone, and it is important to fully understand the terms, risks and long-term financial implications.
The team at Mortgage Required will be happy to talk through Interest Only Mortgages with you. Give us a call on 01628 507477 or email team@mortgagerequired.com
Recent posts
Housing Secretary Angela Rayner has announced a new measure to protect leaseholders in England and Wales from high fees and poorly regulated property management companies.
Saturday 26th September, Andy Burnham announced a new equity loan scheme called “Your First Home”. The scheme, which will be confirmed at next month’s budget, is aimed at first-time buyers looking to purchase a new-build property from a developer signed up to the scheme.
Losing your job or finding yourself ‘between jobs’ is, unsurprisingly, a stressful place to be. Keeping a cool head and taking action is important.
Best UK Mortgage Rates this Week
8 days ago
Here are the lowest fixed mortgage rates of the week, available to first-time buyers, home movers, buy-to-let, and those remortgaging.
Call us for more information: 01628 507477 or email: team@mortgagerequired.com.
Flats 40% cheaper to buy than houses
13 days ago
This price gap between the cost of houses and flats is the biggest it has ever been. Houses are now costing 1.7 times more than a flat, which is 0.4 times higher than 10 years ago
Take a look at our list of houses vs. flats per area.
Are mortgage rates set to increase?
22 days ago
We have seen several lenders increase their mortgage rates over the last couple of weeks. This suggests mortgage rates are likely to rise.
Although nothing is set in stone, lender repricing, rising swap rates, and continued economic uncertainty suggest borrowers should prepare for higher mortgage costs.
AI-altered images put off over half of buyers
24 Aug 2026
According to data from House Buyer Bureau, where over 900 UK homebuyers were surveyed, 54% of people said that they immediately ruled out digitally enhanced property listings.
April Mortgages offer 7x Income Mortgage
13 Aug 2026
April Mortgages - only accessed via a mortgage broker - offers first-time buyers, renters, and home-movers the option to borrow up to 7 times their income on its longer-term mortgages.
More information
Trusted by
