Interest-only vs repayment mortgage calculator
See the real cost difference between paying off the loan and paying only the interest. One is cheaper every month, the other is cheaper by the end. Better to know which trade you're making.
Updated for the 2026/27 tax year · reviewed
Your mortgage
Lenders often price interest-only and repayment products differently, so each rate can be set independently. Interest-only also means the capital still needs a separate repayment plan - an ISA, pension lump sum or planned sale - since none of your monthly payment reduces the balance.
Repayment costs less overall
£114,246
less total interest than interest-only over the same 25 years term
Interest-only monthly payment
£883.33
Repayment monthly payment
£1,169
Interest-only total interest
£265,000
Repayment total interest
£150,754
Balance at term end (interest-only)
£200,000
Balance at term end (repayment)
£0
Balance over time
Interest-only never reduces the balance; repayment clears it to zero by the end of the term.
Interest-only frees up cash. Only if you do something with it.
The case rests entirely on what the lower payment gets invested into. Plan the mortgage and the repayment vehicle together and see whether the balance really gets cleared.
Create your free accountHow this calculator works
Interest-only payments are simple: your loan amount multiplied by the annual rate, divided by twelve. The balance never falls, so you pay that same amount every month for the whole term and still owe the original loan at the end. Repayment payments use the standard UK amortisation formula instead, which blends interest and capital into one payment that clears the balance to zero by the end of the term.
Because interest-only keeps charging interest on the full original balance for the entire term, rather than a balance that's steadily shrinking, its total interest bill is usually far higher than repayment's - even though the monthly payment looks smaller. The chart above makes that trade-off visible: one line stays flat at the full loan amount, the other falls to zero.
This assumes a fixed rate and monthly compounding for the whole term on both sides. It doesn't model what an interest-only repayment vehicle - an ISA, pension lump sum or planned sale - might grow to; UK lenders require evidence of one before approving an interest-only mortgage, since without it you'd still owe the full balance when the term ends.
Questions people ask
What's the total cost difference between the two?
With interest-only, you pay interest on the full loan for the entire term and still owe the original amount at the end, so total interest paid is typically far higher than repayment despite lower monthly payments. This calculator shows both totals side by side so the trade-off is concrete.
Who does an interest-only mortgage suit?
It suits borrowers with a credible, separate plan to repay the capital - such as an investment portfolio, other property, or an expected lump sum - and lenders will usually check for evidence of this at application. It is not simply a cheaper way to buy the same house.
Do I need a repayment vehicle?
Yes - UK lenders generally require proof of a repayment strategy for the full loan amount before approving an interest-only mortgage, such as an ISA, pension lump sum or planned sale of the property. Without one, you risk still owing the full balance at the end of the term.
Can I switch from interest-only to repayment later?
Many lenders allow you to switch, either fully or partially, though your monthly payment will rise to start clearing the capital. It's worth asking your lender or a broker well before the mortgage term ends if your repayment vehicle looks short.
Last reviewed against 2026/27 UK rules. Projections are estimates for education, not financial advice. Understanding your projections.
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