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    What is an interest-only mortgage?

    An interest-only mortgage is a type of mortgage where you only pay the interest on the loan for every monthly mortgage repayment. As you will not be repaying the capital sum each month, you will need to repay the capital amount in full at the end of the term. This is what your ‘repayment-vehicle’ is for.

    In contrast, a repayment mortgage is where you repay both the interest and capital amount you borrowed.

    Expert Mortgage Advice for Interest-Only Mortgages

    Interest-only mortgages can be an attractive option for homebuyers or property investors looking for flexibility in lowering their monthly repayments.

    However, interest-only mortgages are not suitable for everyone.

    Our brokers will assess your individual circumstances and inform you whether this is a suitable solution for you.

    Speak with an expert

    What are the advantages and disadvantages of an interest-only mortgage?

    Interest-only mortgages can offer certain advantages and disadvantages.

    It’s important for borrowers to carefully evaluate their financial situation, long-term goals, and risk tolerance before considering an interest-only mortgage.

    Consulting with a qualified mortgage professional or financial advisor can provide valuable insights and help in making an informed decision.


    • Lower monthly payments: lower monthly payments compared to a traditional mortgage as only the interest is paid.
    • Flexibility for investment: by paying only the interest, borrowers have the opportunity to invest the savings or allocate the funds toward other financial goals.


    • Mortgage balance will not reduce: As only the interest is paid on the loan, there is no progress made toward paying down the principal balance unless you use the overpayment facility.
    • Higher overall cost: Since no payments are made towards the principal balance, the total cost of the mortgage over its lifetime will be higher compared to a traditional mortgage. The borrower pays interest on the entire principal amount for a longer period.
    • Suitable repayment vehicle: As no payments are made towards the capital sum each month, you will need to repay the capital amount in full at the end of the term.
    • Limited availability: Interest-only mortgages are not available to everyone, and lenders can have stricter eligibility requirements. You will either need to have a large deposit, be classed as a high earner, or have significant savings/assets in the background.
    Discuss with an expert whether an interest-only mortgage is right for you
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    Interest-Only FAQs

    • How do I repay the capital sum at the end of my mortgage term?

      You will need to repay the capital borrowed at the end of the mortgage term and therefore will need a suitable ‘repayment vehicle’ in place. These can include one or more of the following:

      • Savings – you could save towards the final lump sum payment through ISAs or other types of saving account.
      • Stocks and shares.
      • Other assets and properties can be used in the future to pay off your mortgage.
      • Pensions can be use by withdrawing from one or more pensions at the end of the term.
    • Do Lenders Check Repayment Vehicles Are in Place?

      Yes. Lenders will want to see evidence that you have a suitable repayment vehicle set up. You’ll need to show your lender that you have a credible repayment strategy in place to pay off the balance at the end of the mortgage term.

      Different lenders have different requirement, and we can help with this.

    • What is a Part & Part Mortgage?

      A Part & Part mortgage is where your mortgage is split. One part will be interest only and the other repayment (capital and interest). This means you will repay some of your capital each month, but not all of it, and you will still need a repayment vehicle to pay the remaining capital at the end of the term.

    • Who can apply for an interest-only mortgage?

      In theory, anyone can apply for an interest-only mortgage. However, in reality you will need to have a big deposit, be a higher earner and/or have a large pot of savings from somewhere.

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