Can I still get an interest-only mortgage?

Yes, but with strict requirements. Most lenders require a substantial deposit (25-50%), a credible repayment plan, minimum income levels (often £75,000+), and minimum loan sizes (often £250,000+). They're much harder to get than before 2014, but remain available for those who qualify.

What's the difference between interest-only and repayment mortgages?

With a repayment mortgage, your monthly payment covers interest plus some capital, so the debt reduces over time. With interest-only, you only pay interest each month — the original loan amount remains unchanged and must be repaid in full at the end of the term.

How will I repay an interest-only mortgage?

You need a credible repayment strategy. Acceptable plans include investments (ISAs, pensions, stocks), downsizing to a cheaper property, sale of other assets, or endowment policies. Lenders assess whether your plan is realistic before approving the mortgage.

Are interest-only mortgages a good idea?

They can be for the right borrowers — typically high earners who want lower monthly payments while investing elsewhere, or those planning to downsize. However, the risk is having no equity growth and potentially no way to repay. Most people are better off with repayment mortgages.

What happens when my interest-only mortgage ends?

You must repay the full original loan amount. Options include: your repayment strategy delivering (investments, downsize), switching to a repayment mortgage, selling the property, or extending the term if a lender agrees. Acting early is crucial — contact your lender years before the end.

Can I switch from interest-only to repayment?

Yes, and this is often advisable if circumstances allow. Your monthly payments will increase significantly, but you'll start building equity. Most lenders allow this switch subject to affordability checks. The earlier you switch, the easier it is to spread the capital repayment.

Interest-Only Mortgages UK 2025: Complete Guide to Options and Requirements

Everything you need to know about interest-only mortgages in the UK. Compare requirements, repayment strategies, pros and cons, and who can still get an interest-only mortgage in 2025.

By PocketWise · 6 June 2025 · 6 min read

Interest-only mortgages allow lower monthly payments by only paying the interest on your loan, not the capital. The original amount borrowed must be repaid in full at the end of the term. This guide explains how they work, who can get them, and whether they might be right for you.

How Interest-Only Mortgages Work

Monthly Payment Comparison

Mortgage Type	£250,000 Mortgage @ 4.5% (25 years)
Repayment	£1,390/month
Interest-only	£938/month
Difference	£452/month less

But: At the end of 25 years…

Mortgage Type	Capital Remaining
Repayment	£0
Interest-only	£250,000

The Key Difference

Factor	Interest-Only	Repayment
Monthly payment	Lower	Higher
Capital paid off each month	None	Yes
Amount owed at term end	Full original loan	£0
Equity built (without price rise)	None	Increases monthly
Total interest paid	More	Less
Repayment plan needed	Yes	No

Total Cost Comparison

£250,000 Mortgage @ 4.5%, 25 Years	Interest-Only	Repayment
Monthly payment	£938	£1,390
Total payments over term	£281,400	£417,000
Capital repaid during term	£0	£250,000
Still owed at end	£250,000	£0
True total cost	£531,400	£417,000

Interest-only costs £114,400 more in this example.

Who Can Get an Interest-Only Mortgage?

Typical Lender Requirements

Requirement	Typical Threshold
Minimum deposit	25-50% (75-50% LTV)
Minimum income	£75,000-£100,000
Minimum loan	£250,000-£500,000
Repayment plan	Must be credible
Property value	Often minimum £500,000+

Interest-Only Applicant Profile

The typical approved borrower:

High income (£100,000+)
Large deposit (40%+)
Professional career or business owner
Existing investments or pension
Clear repayment strategy
Buying higher-value property

Acceptable Repayment Strategies

Strategy	Lender View	Notes
Investment portfolio	Accepted	Must demonstrate growth potential
ISA savings	Accepted	Long-term saving plan
Pension lump sum	Accepted	If matured before mortgage ends
Property sale/downsize	Accepted	Must show equity after sale
Sale of other property	Accepted	Second home, BTL
Endowment policy	Accepted	If suitable value projected
Inheritance	Rarely accepted	Too uncertain
“I’ll think about it later”	Rejected	Not a strategy

Types of Interest-Only Mortgage

Full Interest-Only

Feature	Detail
Monthly payment	Interest only, entire term
Capital paid	None until end
Best for	High earners with solid repayment plan
Risk	Highest — no capital reduction

Part-and-Part

Feature	Detail
How it works	Part repayment, part interest-only
Example	£150k repayment + £100k interest-only
Monthly cost	Between full interest-only and full repayment
Risk	Moderate — some capital reduces

Part-and-Part Example (£250,000 mortgage @ 4.5%)

Split	Repayment	Interest-Only	Monthly	End Balance
70/30	£175,000	£75,000	£1,253	£75,000
50/50	£125,000	£125,000	£1,164	£125,000
30/70	£75,000	£175,000	£1,075	£175,000
Full repayment	£250,000	£0	£1,390	£0
Full I/O	£0	£250,000	£938	£250,000

Interest-Only with Term Extension

Some lenders allow interest-only for part of the term:

Option	Years 1-10	Years 11-25
Interest-only start	Interest only	Switch to repayment
Benefit	Lower early payments	Builds equity later
Risk	Higher later payments

Current Interest-Only Availability

Which Lenders Offer Interest-Only?

Lender Type	Availability	Typical Requirements
High street banks	Limited	High minimum thresholds
Private banks	Good	Wealthy clients
Building societies	Some	Varies significantly
Specialist lenders	Yes	Higher rates
Buy-to-let lenders	Common	Standard for BTL

Interest-Only for Buy-to-Let

Interest-only remains common for landlords:

Reason	Detail
Tax efficiency	Mortgage interest is deductible expense
Cash flow	Lower payments improve yield
Sale strategy	Property sold at term end
Portfolio building	Free up cash for more properties

Note: Buy-to-let interest tax relief has been restricted since 2020.

Interest-Only for Retirement

Retirement Interest-Only (RIO) Mortgages

Feature	Detail
Age	Typically 55+
Term	Until death or care home move
Repayment	Sale of property
Affordability	Based on retirement income
Loan-to-value	Usually 50-60% maximum

RIO vs Standard Interest-Only

Factor	Standard I/O	Retirement I/O
Fixed term	Yes (e.g., 25 years)	No fixed end
Repayment plan	Required	Sale of property
Age at end	Must not exceed limit	No maximum
Moving risk	Must repay/sell by date	Only when leaving home

Pros and Cons of Interest-Only

Advantages

Advantage	Explanation
Lower monthly payments	Typically 30-40% less than repayment
Flexibility	More cash available each month
Investment potential	Invest the difference elsewhere
Tax efficiency (BTL)	Interest remains deductible
Cashflow	Suits irregular income

Disadvantages

Disadvantage	Explanation
No equity build	Mortgage doesn’t reduce
Repayment risk	Must have viable plan
Higher total cost	More interest over term
Harder to get	Strict requirements
Refinance risk	May struggle to remortgage
Negative equity risk	If prices fall

When Interest-Only Might Work

Good Candidates

Situation	Why It Might Work
High earner with investments	Can invest the payment difference
Near retirement with assets	Plan to downsize
Self-employed with variable income	Lower base outgoings
Buy-to-let investor	Industry standard
Short-term ownership planned	Planning to sell
Significant other assets	Wealth elsewhere

Poor Candidates

Situation	Why It’s Risky
Only asset is this property	No fallback
No savings discipline	Won’t build repayment fund
Job insecurity	Can’t rely on future income
No clear repayment strategy	Hope isn’t a plan
Already stretching budget	Interest-only hides affordability problem

If Your Interest-Only Term Is Ending

Steps to Take Now

Timeframe	Action
10+ years remaining	Review repayment plan progress
5-10 years remaining	Assess options, consider switching
3-5 years remaining	Contact lender, get advice
1-2 years remaining	Implement solution urgently
Immediate	Emergency action needed

Options When Term Ends

Option	Requirements	Considerations
Repayment strategy delivers	Investment/savings ready	Ideal outcome
Switch to repayment	Pass affordability	Higher monthly payments
Extend term	Lender agreement	May be difficult
Downsize	Sufficient equity	Lifestyle change
Sell and rent	Accept not owning	May be only option
Remortgage elsewhere	Pass checks	May find flexible lender
Equity release	If over 55	Reduces inheritance

What If I Can’t Repay?

Step	Action
1	Contact lender immediately — don’t wait
2	Explain your situation honestly
3	Ask about term extension or modified plan
4	Get independent mortgage advice
5	Consider selling before forced
6	Contact free debt advice if struggling

Free Help Available

Organisation	Contact
Money Helper	0800 138 7777
Citizens Advice	0800 144 8848
StepChange (if facing debt)	0800 138 1111
Mortgage broker	Check whole market

Switching from Interest-Only to Repayment

Impact on Monthly Payments

£200,000 remaining, 15 years left, 4.5% rate:

Type	Monthly Payment	Total Remaining Payments
Continue interest-only	£750	£135,000 + £200,000 lump sum
Switch to repayment	£1,529	£275,220 (mortgage paid off)
Increase	£779/month	Lower total cost

How to Switch

Check current deal for early repayment charges
Ask current lender about switching (easier)
Compare remortgage deals if switching lender
Prove affordability at higher payments
Complete switch (may be simple admin or full remortgage)

Interest-Only Mortgage Comparison

Example Rates (Illustrative, 2025)

LTV	Interest-Only Rate	Repayment Rate	Difference
50%	4.0%	3.8%	+0.2%
60%	4.3%	4.0%	+0.3%
75%	4.8%	4.3%	+0.5%

Interest-only rates are typically slightly higher than equivalent repayment deals.

Calculating Affordability

Income	Maximum I/O Mortgage (typical)	Note
£75,000	~£337,000	4.5x income
£100,000	~£450,000	Often minimum for I/O
£150,000	~£675,000	Good access to deals
£200,000+	~£900,000	Full product range

Actual lending depends on many factors — these are indicative.

Building Your Repayment Plan

Investment Strategy Example

Need to repay £250,000 in 25 years:

Monthly Investment	Annual Return (assumed)	Value at Year 25
£300	5%	£179,000
£400	5%	£238,000
£500	5%	£298,000 ✓
£400	7%	£322,000 ✓

But: Investment returns aren’t guaranteed. Build in margin for safety.

Downsize Strategy Example

Current Home	Cheaper Home	Mortgage Repaid	Remaining
£500,000	£300,000	£250,000	£50,000
£600,000	£350,000	£250,000	£100,000
£700,000	£400,000	£250,000	£150,000

Requires: Property values to hold/rise, cheaper home available, willingness to move.

Summary

Interest-only mortgages suit a specific borrower profile:

Potentially suitable if:

High income (typically £75,000+)
Large deposit (25-50%+)
Solid repayment strategy
Disciplined saver/investor
Clear exit plan

Probably not suitable if:

Seeking lowest monthly payment at any cost
No credible repayment plan
Property is your only asset
Income uncertain
Poor savings discipline

Currently on interest-only:

Review your repayment plan regularly
Switch to repayment if possible
Contact lender early if concerned
Get advice — don’t ignore the problem

For most buyers, a standard repayment mortgage remains the safer and ultimately cheaper option. Interest-only is a specialist product for those who genuinely benefit from the structure.