Interest-only mortgage calculator
On an interest-only mortgage you pay only the interest each month, so the payments are lower but the amount you borrowed never reduces. This works out both figures, and shows what the same mortgage would cost on repayment terms.
Your mortgage
Your result
Monthly payment
£0.00
Interest only. None of this reduces what you owe.
What you owe over the term
The flat line is interest only. The dashed line is the same loan on repayment terms.
How this is worked out
Interest-only payments are simply the annual interest divided into twelve. Nothing is deducted from the balance, so the calculation does not change from one month to the next.
monthlyPayment = loan × (annualRate ÷ 100) ÷ 12
totalInterest = monthlyPayment × years × 12
stillOwed = loan
A worked example
Borrowing £250,000 at 5% over 25 years costs about £1,042 a month, roughly £312,500 in interest over the full term, and at the end you would still owe the whole £250,000. The same loan on repayment terms costs around £1,462 a month, but you would owe nothing at the end and pay considerably less interest overall.
The part that catches people out
The lower monthly payment is real, but it buys you nothing towards ownership. At the end of the term the lender wants the full amount back in one payment. If you do not have it, the usual options are selling the property, remortgaging if a lender will have you, or extending the term, and none of those are guaranteed to be available when you need them.
This is why lenders treat interest-only cautiously. Most require a credible repayment plan, substantial equity and a higher income than they would for an equivalent repayment mortgage, and many restrict it to particular circumstances.
Where interest-only can make sense
- Buy-to-let. Most landlords borrow this way, because rent covers the interest and the property is expected to be sold or refinanced eventually.
- Irregular income. Someone whose earnings arrive in large, unpredictable amounts may prefer a low fixed commitment plus overpayments when the money arrives.
- A specific plan. A maturing investment, a pension lump sum or a planned downsizing, where the money is genuinely expected and not merely hoped for.
What this assumes
The rate stays the same throughout, interest is charged monthly, no fees are included, and any separate savings towards the capital are assumed to grow at zero return, so that figure is deliberately conservative. Real investments may grow or fall, and none of this is a recommendation about how to repay the capital.