Interest-only mortgages

Your monthly payment only pays the interest charges on your loan – you’re not actually reducing the loan itself. Your monthly payments will therefore be lower than an equivalent repayment mortgage.

The total cost of an interest-only mortgage may be more expensive though, as you must also pay back the loan at the end of the term and this will depend partly on how you intend to pay it back.

Although you can choose how you pay back the loan, you should make sure you know from the beginning how you will be able to pay it back – see Paying back an interest-only mortgage.


Interest-only mortgages can be helpful but they are not suitable for everyone so you should always consider getting financial advice.

The pros

  • Because you’re only paying off the interest, and not the loan itself, your monthly payments to the lender will be lower.
  • You can choose between a number of ways of paying back the loan at the end of the term.

The cons

  • It is not guaranteed that the mortgage will be paid back by the end of the term.
  • You will have to review your plans regularly to make sure you are on track to pay off the mortgage and make changes if necessary.
  • If you wait until the end of the term before paying back the loan, you will pay more interest than the interest charged on an equivalent repayment mortgage because you pay interest on the whole amount over the whole term.
  • If you can’t repay the loan at the end of the term you could lose your home.