UK Mortgage Calculator · Practical guide
Interest Only Mortgage Calculator (UK)
Work out the monthly interest-only payment and full-term cost on any UK mortgage balance.
At a glance
How Interest-Only Payments Are Calculated
The monthly payment on an interest-only mortgage is simply the loan balance multiplied by the monthly interest rate (the annual rate divided by 12). On a £200,000 loan at 5%, that is 200,000 × 0.004167 = £833 per month, and the £200,000 principal is still owed when the term ends.
Interactive tool
UK Mortgage Calculator
Enter your own values, then compare the result with the examples below.
Results
Worked Example Over 25 Years
Because the balance never falls, interest is charged on the full amount for the entire term. For the £200,000 loan at 5% over 25 years:
- Monthly payment: £833
- Total interest over 25 years: £250,000
- Total cost including repaying the £200,000 principal: £450,000
Interest-Only vs Repayment
| Feature | Interest Only | Repayment |
|---|---|---|
| Monthly payment | Lower (£833) | Higher (£1,169) |
| Balance at end of term | Full £200,000 owed | £0 |
| Total interest | £250,000 | £150,760 |
Same loan, same rate, same term — the repayment option costs more each month but roughly £99,000 less overall once the interest-only principal is repaid.
When Interest-Only Makes Sense
Interest-only is most common for buy-to-let properties, where landlords keep monthly costs low and repay the principal by selling the property. For residential borrowers, UK lenders require a credible repayment plan such as investments or other assets. Select "Interest Only" in the mortgage type above and enter your own figures to see your exact monthly payment.
Frequently Asked Questions
Why does the balance never go down on an interest-only mortgage?
Every monthly payment covers only the interest charged that month. No part of the payment reduces the principal, so the loan balance stays exactly the same from start to finish.
How do I repay the principal at the end of an interest-only term?
Common strategies include selling the property, using ISAs or investment portfolios, pension lump sums, or remortgaging. Lenders will ask for evidence of your repayment vehicle before approving the loan.
Are interest-only mortgage rates higher in the UK?
Rates are often slightly higher than equivalent repayment deals, and eligibility criteria are stricter, with larger deposit requirements and income checks on the repayment strategy.