See exactly what an interest-only mortgage costs each month — and the catch: the full capital is still owed at the end. The calculator also shows the repayment-mortgage payment side by side, so you can compare the trade-off.
Monthly cost & capital owed
On an interest-only mortgage your monthly payment covers only the interest — none of the capital. So the payment is simply the loan multiplied by the monthly interest rate:
A £200,000 loan at 4.5% costs £200,000 × 0.045 ÷ 12 = £750 a month. The big difference from a repayment mortgage is that the full £200,000 is still owed at the end of the term and must be repaid in one lump sum.
The lower monthly cost is tempting, but you pay for it later. Here's a £200,000 loan over 25 years at 4.5%:
| Interest-only | Repayment | |
|---|---|---|
| Monthly payment | £750 | £1,112 |
| Owed at the end | £200,000 | £0 |
| Total interest | £225,000 | £133,500 |
Lenders insist on a credible repayment plan before approving interest-only: an ISA or investment pot, the sale of the property, or another asset. Build that pot with the savings calculator or ISA calculator, and compare the full-repayment route with the mortgage calculator. Interest-only is most common for buy-to-let landlords, where the property is usually sold to repay the loan.
You pay only the interest, so the payment is the loan × monthly rate. £200,000 at 4.5% is £200,000 × 0.045 ÷ 12 = £750 a month, with the full £200,000 still owed at the end.
On repayment, each payment clears interest plus capital, so the loan hits zero by the end. On interest-only you pay only the interest — lower monthly cost, but the whole capital remains owed.
With a credible plan: savings, investments, an ISA, or selling the property. Lenders check this plan before approving, because the full loan is due as a lump sum at the end.
Often yes — many lenders let you convert all or part of the balance to repayment, which raises your monthly payment but starts reducing the debt. Speak to your lender or a broker.
