Top 10 Interest Only Mortgages – Compare Interest Only Mortgage Rates

An interest only mortgage or interest only remortgage lets you make monthly payments which only cover the interest on the loan.

Interest only mortgages come with lower monthly repayments than other mortgages. But, at the end of the term, you’ll still owe the amount you borrowed – and you’ll have to pay it back in full.

That’s because your interest only mortgage repayments don’t go towards reducing the amount you owe. They just cover the interest charged on what you’ve borrowed.

Here’s an example. If you take out a £180,000 interest only mortgage with an interest rate of 3.5%, the monthly repayments could be £525. But when the mortgage ends, you’ll still owe £180,000.

Here’s everything you need to know about interest only mortgages.

What happens at the end of an interest only mortgage?

With interest only mortgages you’ll need to find a way to pay off the balance at the end.

If you’re a landlord, you might have a buy to let interest only mortgage (BTL). This is an interest only mortgage for a rental property. You could sell the property at the end of the mortgage term and use the money you make to pay off the mortgage.

But you might have an interest only residential mortgage for a property that’s your home. If that’s the case, you’ll either need to save up or invest during the mortgage term. That way you’ll be able to repay the balance when the mortgage ends.

You might be able to pay off your interest only mortgage using a lump sum of cash you’ve inherited. But you’ll usually need to save up using either:

  • A savings account

  • An investment fund.

Of course, you do still have the option to sell your home, but you’d need to find somewhere else to live. Alternatively, you could take out a new mortgage.

When you apply for an interest only mortgage, you’ll need to tell the lender how you plan to pay off the balance.

Your options to pay off your interest only mortgage

It’s very important that if you’ve already got an interest only mortgage, you have a plan in place so you can pay it off when the term ends.

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Here are some examples of what your plan could involve:

  • You could switch your mortgage to a repayment mortgage and start paying off some of the balance.

  • You could make overpayments on your mortgage, as long as your mortgage conditions let you do so. You’d end up paying less interest and also paying off all or some of your balance. This mortgage overpayment calculator shows you how much you’d save in interest.

  • You could set up an investment plan, and use the capital to pay off your mortgage at the end of the term.

It’s a good idea to make a plan now and take action, rather than wait until you’re close to the end of your mortgage term.

What’s a repayment mortgage?

Most property purchases are made using a repayment mortgage. With a repayment mortgage, your monthly repayments clear the balance of what you borrowed, as well as paying the interest. At the end, you’re guaranteed to owe nothing.

It’s the alternative to an interest only mortgage.

Should you get an interest only or repayment mortgage?

Are interest only mortgages cheaper than repayment mortgages?

The advantage of the best interest only mortgages is that the monthly repayments are much lower. You can work out how much you’d pay using an interest only mortgage calculator.

But over their whole term they’ll cost more because interest only mortgage rates aren’t always the lowest. Plus, you’ll pay interest on the whole amount borrowed from start to finish, rather than pay interest on a gradually decreasing sum owed.

Repayment mortgages usually cost more each month, but less over the mortgage’s term. You’ll find it easier to get a low interest mortgage for repayment than you will to get an interest only mortgage.

Read this guide to interest only mortgages and repayment mortgages for a breakdown of how much each type costs and which will suit you better.

Are interest only mortgages a good idea?

There are definitely some benefits of interest only mortgage options.

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The monthly payments are likely to be far lower. This means you’ll have spare cash, which you could use to improve your home and increase its value.

With an interest only BTL mortgage, it’s common for a landlord to save their rent profits and put it towards paying off the mortgage at the end.

Are there any downsides to interest only mortgages?

Even with the very best interest only mortgage rates, an interest only mortgage can cost you more in the long run.

That’s because you’ll pay interest on the whole amount borrowed for the entire term. Whereas with a repayment mortgage, you’d owe progressively less, and you’d only pay interest on what you still owed.

Plus, you won’t officially own your house, even when your mortgage ends.

There’s also an element of risk if you’re hoping your property will be worth enough to pay off the balance at the end. There are no guarantees when it comes to property prices.

You might find you’re having to save hard throughout your mortgage term.

Plus, the strict criteria to get an interest only mortgage means not everybody is eligible to get one.

Can I get an interest only mortgage?

The truth is that interest only mortgage deals haven’t been easy to get since the financial crisis in 2008. Lenders are now more cautious about offering interest only mortgages

There’s only a handful of lenders who will offer interest only mortgages, UK wide. To get an interest only mortgage, you’ll need to meet tough interest only mortgage criteria. This includes having a large deposit and a proper repayment plan in place for how you’ll pay off the balance at the end of the term.

If you do manage to get an interest only mortgage, you’ll probably find that your lender wants to check here and there that your repayment plan is on track.

However, when it comes to getting an interest only mortgage, buy to let customers are in luck. There are still lots of interest-only mortgages available to landlords. That’s because the lenders have the security that the home can be sold at the end of the term.

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Can people with bad credit get an interest only mortgage?

It’s hard for anyone to get an interest only mortgage. To get one with bad credit is even harder.

You might like to think about getting something called a ‘part and part mortgage’. That’s when part of your mortgage is interest-only, and the other part is a repayment mortgage.

It will make your monthly payments a bit cheaper, but at the same time you’ll be paying off some of the balance. That means you’ll have less to repay at the end and your interest payments will gradually decrease.

If you’ve got bad credit, you’re more likely to qualify for this than you are for an interest only mortgage for the full amount.

How do I find the best interest only mortgage rates?

It’s important to do a mortgage interest rates comparison and use an interest only mortgage payment calculator so you can get all the facts.

By using our interest only mortgage comparison at the top of this page you should be able to find the best mortgage interest rates, UK wide.

It includes all the interest only mortgage rates, UK wide, so you can find the one that suits you best.

Interest only mortgage FAQs


Can I find an interest only mortgage for buy to let?


Can I get a part and part mortgage?


Can I find an interest only remortgage?


Can I switch between repayment and interest only?


Yes, you can switch from one type of mortgage to the other. Here is how to remortgage.

About our mortgage comparison


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Last updated: 10 September, 2020