Compare Interest-Only Mortgage Rates

Look at interest-only mortgage rates on the market right now with our free best buy tool.

Mortgage Details

Advanced filters

We've found 850 mortgage deals that match your search

Sort by

These are indicative figures only and may not represent all the costs associated with each product. For more information speak to one of our mortgage brokers on 0330 433 2927.

NO MATTER
HOW COMPLEX

Talk to Our Experts Today

0330 433 2927

Send Us an Enquiry

What Is an Interest-Only Mortgage?

An interest-only mortgage is a type of mortgage where you only make interest payments each month, as opposed to the interest and capital payments you would make on a repayment mortgage.

Making interest payments each month stops the mortgage balance from increasing but doesn’t go towards paying it off. You pay the full mortgage balance at the end of the mortgage term or when the property is sold.

The interest-only mortgage lender will require that you provide evidence of a suitable repayment vehicle – i.e. how you’re going to repay the mortgage at the end of the term.

As with a repayment mortgage, with an interest-only mortgage you’ll be on your introductory rate - e.g. fixed, variable - for a set period before going onto your lender’s SVR (standard variable rate). When you go onto your lender’s SVR, you’ll have the choice of continuing with your interest-only payments until the end of the mortgage term, but a cheaper option is usually to remortgage onto a new deal.

What Is a Part Mortgage?

Some lenders are able to offer part interest-only and part repayment mortgages, also known as part mortgages. These can help reduce the monthly payments borrowers would face on a repayment mortgage without having to go on a mortgage that’s solely interest-only and have a large lump sum to repay at the end of the term. For example, if you had a mortgage of £200,000, you could have £100,000 on repayment and £100,000 on interest-only.

Interest-Only Residential Mortgage

Most residential mortgages are repayment but some people find that residential interest-only mortgages suit them better, typically because the monthly payments are lower.

Would an Interest-Only Residential Mortgage Suit You?

You may find an interest-only residential mortgages useful if:

  • You have a repayment strategy – e.g. you have equity in other properties that you could sell, or you have other investments
  • You’re planning on downsizing at the end of the mortgage term when it’s time to repay the mortgage – e.g. you intend on moving after your children have left home as you don’t want to maintain a big house
  • You want to remortgage onto an interest-only product because you want to reduce your monthly payments and you have a suitable repayment vehicle. Learn more about the remortgage deals available now

Interest-Only Buy-to-Let Mortgage

Most buy-to-let mortgages are arranged on an interest-only basis. If this is the type of mortgage you’re after then see our buy-to-let mortgage page.

John Charcol Expert Tip - February 2024

"An interest-only mortgage allows borrowers to focus on lower monthly payments by covering only the interest for a defined period. This unique approach offers financial flexibility, enabling individuals to allocate resources strategically, potentially freeing up funds for other investments or financial goals. There are a range of lenders who offer competitive rates and criteria, you can also consider part repayment and part interest only if you’re looking to balance your risk."

- Mortgage Technical Manager Nick Mendes, CeMAP qualified

How Can John Charcol Help You Find an Interest-Only Mortgage?

We Can Find the Best Interest-Only Mortgage for Your Needs

We’re a whole of market broker with nearly 50 years of experience which means we can find the perfect interest-only mortgage for your circumstances. Our mortgage experts are highly recommended with over 2,100 5* reviews.

We Give Tailored Advice to Help You Secure the Right Deal

We work around your schedule to provide bespoke advice that meets your unique current and future needs. Our specialists can help with complex income structures, expat mortgages, bad credit and large loans. 

Comprehensive Support Throughout the Application Process

We take care of the entire mortgage process and liaise with lenders on your behalf. We can also help arrange protection, insurance, conveyancing and moving. Customers can even easily submit ID and documents using our app.

Why Might An Interest-Only Mortgage Not Be Right For You?

With an interest-only mortgage, borrowers benefit from lower monthly payments as they solely pay the interest on the loan for the mortgage term. However, this can result in a greater overall cost which is one reason why an interest-only mortgage may not be suitable for some borrowers. The total interest paid by the borrower during the life of the loan may be higher than with a conventional mortgage because the borrower is not reducing the principal.

Furthermore, when the mortgage term ends the borrower must have a repayment vehicle in place. Repayment vehicles typically take the form of selling the property or using funds from somewhere else - e.g. pension, ISA, etc. This can be challenging for some borrowers who may not want to move at a later point in life, want assurances that their mortgage will be paid at the end of the term and/or concerned that their investments will not perform adequately.

Borrowers should weigh their options and consider their future plans when looking at taking out an interest-only mortgage very carefully before making a final decision.


What's the Difference Between Interest-Only and Capital Repayment Mortgages?

If you’re thinking about getting an interest-only mortgage, it’s important to know the difference between interest-only and capital repayment mortgages - as well as part mortgages which are a kind of compromise of these products.

Interest-Only Mortgages

What's an interest-only mortgage compared to other mortgages? Interest-only mortgages allow borrowers to pay only the monthly interest on their loan for the mortgage term before paying the principal. This results in lower monthly payments, but borrowers must repay the full mortgage amount at the end of the mortgage term or upon remortgaging/selling the property.

Capital Repayment Mortgages

Capital repayment mortgages require borrowers to make monthly payments that cover the interest and go towards the outstanding mortgage amount, resulting in a gradual reduction of the loan balance over time and reduced interest payments. Monthly payments may be higher than with interest-only mortgages, but borrowers are paying off the principal and will build up equity quicker, without the need for a repayment vehicle.

Part Mortgage

A part mortgage is part interest-only and part repayment. For example, if you had a mortgage of £200,000, you could have £100,000 on repayment and £100,000 on interest-only. Essentially, this would allow you to make lower monthly payments (than if you were on a repayment mortgage) while still making contributions to the outstanding loan amount (that you wouldn’t be able to make on an interest-only). This way, you’re not left with the total outstanding mortgage loan that you began with at the end of the mortgage term.


How Much Are Interest-Only Mortgage Interest Rates?

Interest-only mortgage rates can vary based on several factors - including the lender, the borrower’s deposit and their creditworthiness. Furthermore, because interest-only mortgages are seen as riskier by lenders, they often have higher interest rates than conventional mortgages. 

Interest-only mortgages may also require larger deposits and have stricter qualifying criteria. If you’re considering an interest-only mortgage, you should speak to a mortgage broker who can compare interest rates from several lenders to ensure you’re receiving the best available terms. You should also think about the interest-only mortgage's long term costs and potential financial implications before deciding if it's the best option for you..


Can I Pay Off an Interest-Only Mortgage Early?

It's possible to pay off an interest-only mortgage early, though borrowers should be aware of any ERCs (early repayment charges) that may apply. You should find out whether your lender has ERCs in place before making extra payments or paying off the mortgage early.

Some lenders offering interest-only fixed rate products may allow you to make overpayments which means you’ll be able to pay back up to 10% of your mortgage each year while in your fixed rate period.

By paying off the mortgage early, if the lender allows, you can save thousands of pounds in interest costs. You can also build equity in your home faster than if you waited until you remortgaged or reached the end of your mortgage term. 

If you know you’re going to want to pay off some of the outstanding mortgage loan earlier than you would on a standard interest-only, then you may want to consider a part interest-only and part repayment mortgage.


What Happens at the End of an Interest-Only Mortgage?

After you reach the end of your introductory rate on your interest-only mortgage, you’ll have a couple of different options. You can stay on your lender’s SVR (standard variable rate) until the end of the mortgage term when you have to repay the outstanding mortgage amount, you can remortgage, you can opt for a product transfer, or you can enact your repayment vehicle. 

Your repayment vehicle will have been agreed upon with your lender when you first took out the mortgage.

Some examples of suitable repayment vehicles include:

  • Selling the property - you can sell the property and potentially downsize, using the proceeds to pay off the mortgage balance
  • Selling other property - if you have other property investments that you’re able to sell, you can use the funds from the sale to pay off your mortgage
  • Pension - if you’ve contributed enough to your pension over the years, you may be able to use it to pay off your mortgage
  • Stocks and shares or cash ISAs - if your investments have performed well you may be able to use funds from them as a repayment vehicle

It's important for borrowers to plan ahead and make sure they have a strategy in place for paying off the principal balance of the loan to avoid default or foreclosure.


Process for Buying a Home/Remortgaging

1. First Conversation with Adviser

When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you. Your adviser will ask you some questions then go away and search mortgage deals to find you the best product for your circumstances and future needs. They’ll organise a follow up during which they’ll present you with what they’ve found.

2. Decision in Principle

Once you’re happy with their recommendation, they’ll go about securing your DIP (Decision in Principle) - which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property.

3. Offer on Property/Remortgaging

After the lender has agreed your scenario, you’ll be in a position to make an offer on a property or move forward with remortgaging.

4. Pre-Application and Submission

Following the acceptance of your offer, we’ll send you some information which explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged mortgage application.

5. Lender Underwriting and Valuation

The lender will underwrite your application; this basically means they’ll verify that the information you’ve provided is correct and review all your documents for themselves. They’ll also instruct a valuation for their purposes on the property to make sure there are no significant problems with it.

6. Mortgage Offer

If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.

7. Conveyancing

After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property/remortgaging. If you're buying, you’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange.

8. Exchange and Completion

If you’re buying a property, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor; it’s at this point that you would put down your deposit and be legally bound to the property. The purchase will complete when the money is transferred on an agreed-upon date. If you’re remortgaging, then your conveyancer/solicitor will set a date to draw down the funds and pay off any existing lender(s) once the mortgage offer’s released.


Interest-Only Mortgage Criteria

Below we’ve listed some of the criteria you must meet to get an interest-only mortgage:

  • You must provide a minimum deposit of 25% for an interest-only mortgage
  • You must meet a minimum income requirement set by some lenders
  • You must meet a minimum equity threshold set by some lenders if you're using existing property as a repayment vehicle 
  • You must be able to provide evidence of how you will repay the mortgage once the term is complete - e.g.
    • You’ll sell the property and use the funds from the sale to repay the mortgage
    • You’ll have access to funds by the end of the mortgage term
    • You have financial investments
    • You have equity in other properties that you intend to sell

Interest-Only Mortgage Calculator

Mortgage loan calculator
First applicant

First Mortgage Applicant

* £
* £
Second applicant

Second Mortgage Applicant

* £
* £
Result

As a guide, you could potentially borrow around:

 

Want to find out more? Call us or Email Us

Interest-Only Mortgage FAQs

What Are the Main Benefits of an Interest-Only Mortgage?

The main benefit of an interest-only mortgage is obviously that you only make interest payments each month – not both interest and capital payments.

Looking for something different? Our team can assist with all sorts of specialist mortgages.

Who Are the Best Interest-Only Mortgage Providers?

A lot of lenders offer interest-only products. There’s no single, best provider as the best provider for you will depend on your unique situation.

Can You Get an Interest-Only Mortgage with a 90% Loan-to-Value?

For most lenders, the maximum LTV (loan-to-value) you can get on an interest-only mortgage is 75%. However a few lenders will allow LTVs up to 80%.

There’s also the other possibility of a part interest-only and part repayment mortgage. Some lenders will allow part interest-only and part repayment mortgages up to 85% LTV, but not 90%. For more information about this kind of specialist mortgage arrangement, speak to an adviser on: 0330 433 2927.

What Are Some Interest-Only Mortgage Rates?

You can compare the best interest-only mortgage rates currently on the market by using our free best buy tool.

JC Legal

We can refer you to a conveyancer from our carefully selected panel of conveyancers and solicitors. Our recommendation will be based on your situation and timeframe to ensure your move goes according to plan. 

Learn More

Concierge

Through our partnership with Just Move In, we can help you move into your new home, set up utilities, register for Council Tax and more. There’s no arrangement fee and you could save up to 8 hours of hassle.

Learn More

Home Insurance

We can find you suitable buildings and contents insurance through our partnership with Legal and General.

Learn More

Protection

Ever thought about mortgage protection? Our in-house team can arrange certain life assurances tailored to your requirements.

Learn More