Interest-Only Mortgage Calculator
This interest-only mortgage calculator shows your monthly payment on an interest-only loan — and the full loan balance you'll still owe at the end of the term, since none of that payment reduces the principal. Enter your loan details to see both figures alongside what a standard repayment mortgage would cost instead.
How much you're borrowing.
The annual interest rate on the loan.
The length of the interest-only period.
Monthly interest-only payment
£1,146
What you'll pay each month — none of it reduces the loan balance.
The full original loan amount — interest-only payments never reduce it.
For comparison — what you'd pay monthly on a standard repayment mortgage instead.
How to use this interest-only mortgage calculator
- 1Loan amount, interest rate and term: the basics of the mortgage you're comparing.
- 2Compare the monthly interest-only payment against the equivalent repayment mortgage payment to see the true tradeoff — a lower payment now versus the full balance still owed later.
Understanding your results
The monthly interest-only payment is genuinely lower than a repayment mortgage's payment — but the balance due at the end of the term is the entire original loan amount, since none of your payments have reduced it. This is the single most important thing to understand about interest-only borrowing: you need a real, credible repayment plan (savings, investments, or planned sale) to clear that balance when the term ends.
The formula
Interest-only payment = Loan amount × Rate ÷ 12 · Balance at end = full original loan amountBecause none of the monthly payment goes toward principal, the interest calculation never changes — it's simply the loan amount times the monthly rate, every single month, for the entire term. Compare this to a repayment mortgage, where the payment includes a principal portion that grows over time as the balance (and therefore the interest portion) shrinks.
A worked example
A £250,000 loan at 5.5% over 25 years costs about £1,146/month interest-only — versus roughly £1,534/month on an equivalent repayment mortgage. The interest-only option saves about £388 a month, but at the end of 25 years you still owe the full £250,000, whereas the repayment mortgage would be fully paid off.
Notes for the UK, US and India
Interest-only mortgages are common for buy-to-let properties (where the eventual sale or refinance is the repayment plan) and, in the UK, for some residential borrowers with a separate investment vehicle intended to repay the capital. Lenders scrutinize the credibility of your repayment plan closely — 'I'll figure it out later' isn't an accepted strategy.
Frequently asked questions
Is an interest-only mortgage ever a good idea for a home I live in?+
It can work if you have a genuine, credible plan to repay the capital — a maturing investment, expected inheritance, or planned downsizing — but it carries real risk if that plan falls through, since you'll still owe the full amount with no equity built from payments.
Why are interest-only mortgages common for buy-to-let?+
Landlords often plan to repay the capital by selling the property or refinancing at the end of the term, and the lower monthly payment improves the rental income coverage ratio lenders require.
Can I switch from interest-only to repayment later?+
Often yes, subject to lender approval and affordability checks — your payment will rise significantly since it now needs to include principal, so plan the switch with your full budget in mind.
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