For most borrowers no — you never pay off capital. Can work for buy-to-let or high-net-worth borrowers.

Mortgages ⏱ 3 min read 📅 Updated Apr 2026

Interest Only Mortgage Calculator UK 2026: Costs, Risks & Is It Right for You?

Q: How does an interest-only mortgage work?

Monthly payments cover only interest — not capital. At the end you still owe the full loan and must repay it.

Chandraketu Tripathi

Finance Editor, Kaeltripton

Published 4 Apr 2026

Last reviewed 18 Apr 2026

✓ Fact-checked

Interest Only Mortgage Calculator UK 2026: Costs, Risks & Is It Right for You?

Interest-only mortgages can dramatically reduce your monthly payments — but they come with serious risks. Here's everything you need to know before considering one in 2026. Updated April 2026

Interest-Only vs Repayment: Monthly Cost Comparison

Loan Amount	Rate	Term	Interest-Only	Repayment	Monthly Saving
£150,000	5%	25 years	£625	£877	£252
£200,000	5%	25 years	£833	£1,167	£334
£300,000	5%	25 years	£1,250	£1,751	£501
£200,000	4.5%	25 years	£750	£1,111	£361
£400,000	5.5%	25 years	£1,833	£2,452	£619

These calculations illustrate the monthly payment difference only — the critical point is that with interest-only, the full loan balance remains outstanding at the end of the term.

Who Can Get an Interest-Only Mortgage in 2026?

Interest-only mortgages became far more restricted after the 2008 financial crisis, when millions of borrowers reached the end of their terms with no repayment plan. In 2026, lenders apply strict criteria:

Lender Requirement	Typical Threshold
Maximum LTV	60-75% (you need 25-40% equity/deposit)
Minimum income	£75,000+ for many lenders
Repayment vehicle	ISA, pension, investments, or property sale
Minimum loan	Often £500,000+ for large lenders
Age at end of term	Must be able to repay before or at retirement

Accepted Repayment Strategies

Lenders require a credible plan to repay the capital at the end of the term. Accepted strategies typically include: sale of the mortgaged property (most common for buy-to-let); sale of another property; endowment policy or investment portfolio; pension lump sum; or ISA savings.

Lenders will want evidence that your strategy is on track. Vague plans are not accepted — you need documented investment statements or pension projections.

The Interest-Only Mortgage Time Bomb

The FCA has warned repeatedly about the 'interest-only mortgage time bomb' — around 150,000 interest-only mortgages are estimated to have no repayment plan in place. If you have an interest-only mortgage and are unsure how you'll repay the capital, contact your lender immediately and seek advice from a qualified mortgage adviser.

KAELTRIPTON VERDICT

Interest-only mortgages significantly reduce monthly payments but leave the full capital outstanding. They suit buy-to-let investors and high-net-worth borrowers with genuine repayment strategies. For most owner-occupiers, a repayment mortgage is safer and more appropriate.

Rating: ★★★☆☆ Specialist Use Only

Q: How does an interest-only mortgage work in the UK?

A: Monthly payments cover only interest. At the end of the term you still owe the full original loan.

Q: Who can get an interest-only mortgage?

A: Typically 60-75% LTV max, credible repayment strategy, often £75,000+ minimum income.

Q: How much cheaper is interest-only vs repayment?

A: On £200,000 at 5%, interest-only is ~£833/month vs ~£1,167 repayment.

Q: Is it a good idea?

A: For most owner-occupiers no. Can work for buy-to-let investors with genuine repayment strategies.

This article is for informational purposes only and does not constitute financial advice. Mortgage rates change daily. Always consult a qualified mortgage broker before making decisions. Your home may be repossessed if you do not keep up repayments.

Part of our complete guide:

UK Mortgage Rates April 2026 - Current Rates & Guide →

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Editorial Disclaimer

The content on Kaeltripton.com is for informational and educational purposes only and does not constitute financial, investment, tax, legal or regulatory advice. Kaeltripton.com is not authorised or regulated by the Financial Conduct Authority (FCA) and is not a financial adviser, mortgage broker, insurance intermediary or investment firm. Nothing on this site should be construed as a personal recommendation. Rates, figures and product details are indicative only, subject to change without notice, and should always be verified directly with the relevant provider, HMRC, the FCA register, the Bank of England, Ofgem or other appropriate authority before any financial decision is made. Past performance is not a reliable indicator of future results. If you require regulated financial advice, please consult a qualified adviser authorised by the FCA.

Chandraketu Tripathi

Finance Editor · Kaeltripton.com

Chandraketu (CK) Tripathi, founder and lead editor of Kael Tripton. 22 years in finance and marketing across 23 markets. Writes on UK personal finance, tax, mortgages, insurance, energy, and investing. Sources: HMRC, FCA, Ofgem, BoE, ONS.