Interest-Only Mortgages

When you’re weighing up your mortgage options, one question that often comes up is whether to go for a repayment mortgage or an interest-only mortgage. While repayment mortgages are far more common, interest-only still has its place, particularly for certain buyers and investors. We’ll walk you through how they work, the advantages, and the things you really need to think about before deciding.

What is an Interest-Only Mortgage?

With an interest-only mortgage, your monthly payment covers just the interest on the loan. You don’t repay any of the capital (the amount you borrowed) during the term. That means your payments are usually lower compared to a repayment mortgage, but at the end of the term you’ll still owe the full original loan amount.

Because of this, lenders require you to have a clear and reliable repayment strategy in place — for example, using investments, savings, or the sale of a property to pay back the loan.

The Benefits of an Interest-Only Mortgage

Lower monthly payments: Because you’re only covering the interest, the monthly cost is often significantly lower.

Cash-flow flexibility: This can free up money each month for other expenses, investments, or business purposes.

Appealing for landlords: Many buy-to-let investors choose interest-only because it keeps monthly costs down while they benefit from rental income and long-term property growth.

The Risks and Considerations

You still owe the full loan: At the end of the term, you’ll need to repay the original mortgage amount in one go. If you don’t have a solid plan, this can be risky.

Higher long-term costs: Since you’re not reducing the capital, you’ll pay interest on the full balance throughout the term.

Stricter lender requirements: Not all lenders offer interest-only, and those that do will often ask for higher deposits, strong repayment evidence, or a higher income level.

Less security: Unlike a repayment mortgage, you won’t automatically build equity in your home unless the property value rises.

Should You Consider Interest-Only?

The key question is whether you have a realistic and reliable repayment plan. Without one, an interest-only mortgage can leave you vulnerable. But with the right strategy and circumstances, it can offer valuable flexibility.

At Turtle Mortgages, we’ll always look at your full situation — your goals, income, and long-term plans — before advising on whether interest-only is suitable. And, as always, our service is completely free.

Sounds good, right? All you need to do is book a call with us.