It compares interest-only and repayment structures on the same loan amount and term so you can see the cash-flow benefit of the lower payment against the cost of still owing the capital later.
MORTGAGE COMPARISON
Interest-only vs repayment mortgage calculator
Interest-only monthly payment
£938
- Repayment mortgage payment
- £1,390
- Interest-only total interest
- £281,250
- Repayment total interest
- £166,874
- Capital still outstanding
- £250,000
Interest-only can look cheaper month to month, but the balance does not fall unless you repay capital separately. A repayment plan at the end matters as much as the monthly figure.
An interest-only mortgage can look cheaper month to month, but the capital never falls unless you have a separate repayment plan. This comparison shows the monthly cash-flow difference, the lifetime cost and the balance you would still owe at the end of the term.
It compares interest-only and repayment structures on the same loan amount and term so you can see the cash-flow benefit of the lower payment against the cost of still owing the capital later.
On a £200,000 mortgage over 25 years at 4.5%, a repayment deal is roughly £1,112 per month and leaves no balance at the end of the term. The matching interest-only payment is about £750 a month, but the borrower still owes the full £200,000 later. The lower monthly bill is real; the deferred capital is the part that makes the comparison matter.
- Comparing only the monthly payment and ignoring the capital that still has to be repaid on an interest-only mortgage.
- Assuming a lower monthly payment automatically means the mortgage is cheaper overall.
- Forgetting that the repayment strategy, product fees and future rate changes can change the result.
- Interest-only can look cheaper month to month, but the capital does not reduce unless you repay it separately.
- Lender policy, repayment strategy, product fees and rate changes can all alter the comparison.
This is the fast decision check. Interest-only keeps the monthly bill lower. Repayment clears the debt. The useful question is whether the lower cash flow now is worth the capital you would still owe later.
Repayment monthly£1,112
Interest-only monthly£750
Monthly gap£362
Capital still owed£200,000
On a £200,000 loan over 25 years at 4.5%, repayment costs about £1,112 per month and totals roughly £333,499. The interest-only payment is about £750 per month, but the capital stays outstanding unless you have a separate plan.
How this fits the mortgage cluster
If cash flow is the main issue, interest-only gives a lower monthly figure but leaves the capital outstanding. If you want to reduce the loan faster, check overpayments or a shorter term instead. If you are not sure whether the deal is affordable at all, switch to the affordability calculator and test the full household budget first.
Use this page when you want to compare structures. Use the mortgage calculator when you want the raw payment, and use the overpayment and rate-rise tools when you want to test what happens after the mortgage has already been set up.
SOURCES & REVIEW
Checked against official guidance
Last reviewed 1 September 2026 · Rule version GB-2026.27.1
Daily/weekly source monitoring. If a source changes, the affected rule set is reviewed before publication.
All source links are kept visible so you can verify the figures used on this page.
Source line: MoneyHelper explains that interest-only mortgages normally need a credible repayment strategy and that the capital remains outstanding until you repay it.
MoneyHelper: Repayment methods ↗Sources, methodology and update policy →Report an issue or correction →WHY RESULTS DIFFER
Why two users can see different results
Why the result can differ
Different tax codes, payroll periods, Scottish bands, pension methods or lender assumptions can change the outcome.
One-off bonuses, pay frequency, overpayments, allowances and reliefs can move the result away from a simple annual estimate.
Where a rule depends on eligibility or legal status, this page shows an estimate and links to official guidance.
This section is intentionally repeated on key tools so the explanation stays near the result instead of being hidden in a separate policy page.
COMMON QUESTIONS
Frequently asked questions
Who can get an interest-only mortgage in the UK?
Lenders usually require a credible repayment plan, a stronger affordability profile and a larger deposit than a standard repayment mortgage.
Is interest-only ever the better choice?
It can be useful when cash flow matters most or when a clear lump sum or sale plan exists, but most owner-occupiers are safer on repayment.
What happens at the end of an interest-only term?
The original capital is still due, so you need a sale, a refinance, a switch to repayment or another repayment strategy.
Can I mix the two?
Yes. Some lenders offer part-and-part mortgages, where part of the balance is interest-only and the rest is on repayment.
Can I switch later?
Usually yes, but the lender may treat that as a product switch or a fresh application depending on the deal and your circumstances.
Why is the monthly payment lower on interest-only?
Because you are only paying the interest charge, not reducing the capital balance each month.
Is interest-only cheaper overall?
Not necessarily. The monthly payment is lower, but the capital still has to be repaid later.
Does this replace lender advice?
No. It is a comparison tool only; repayment strategy and affordability still need proper review.