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A repayment mortgage clears your debt in full by the end of the term. An interest-only mortgage keeps monthly costs much lower, but the full loan remains to be repaid at the end, so lenders demand a credible repayment plan. Repayment suits most homeowners; interest-only suits people with strong incomes, assets or a clear exit strategy. Here is how the two compare in practice, with 2026 figures.
Interest-only runs around £314 a month cheaper on a £200,000 illustrative loan
The full loan remains payable at the end of an interest-only term
Several big lenders want £75,000+ income for interest-only; others have no minimum
Part and part splits your loan between repayment and interest-only
445,000 interest-only loans remain outstanding, with 60,000 maturing by end-2027
How HTG Mortgages Can Help
We compare interest-only, part-and-part, repayment and retirement interest-only options across 120 plus lenders, and we know each lender’s income floors, equity rules and accepted repayment vehicles. That knowledge makes or breaks interest-only applications. Start on our interest-only mortgages page, or get in touch for a free, no-obligation chat. We reply within 2 hours, Monday to Friday.
The Numbers, Side by Side
Take a £200,000 loan over 25 years at 5.44 per cent, the average five-year fixed rate in early August 2026 (illustrative only, your rate will differ). On interest-only you would pay around £907 a month, but still owe £200,000 at the end of the term, having paid roughly £272,000 in interest. On repayment you would pay around £1,221 a month, owe nothing at the end, and pay roughly £166,000 in interest. Interest-only is about £314 a month cheaper, but over the full term costs over £100,000 more in interest, plus the small matter of the outstanding capital.
Who Can Actually Get Interest-Only?
Criteria are much stricter than for repayment, and they vary hugely:
- Income floors: several big lenders want a minimum income of £75,000 for a sole applicant (sometimes £100,000 joint), while other lenders have no minimum income at all.
- Loan to value: pure interest-only is typically capped at around 75 per cent with the big lenders and lower elsewhere.
- Repayment vehicle: you need an acceptable plan, such as savings and investments, a pension lump sum, the sale of another property or downsizing, usually with minimum equity requirements attached.
This is a market where lender choice makes or breaks the application.
Speak to an expert
Whether you’re buying your first home, moving house or remortgaging, HTG Mortgages is here to make the process as simple and stress-free as possible. I’ll compare mortgages from over 120 lenders, guide you every step of the way and help you find the right mortgage for your circumstances.
Part-and-Part: The Middle Ground
A part-and-part mortgage splits your loan, with a portion on repayment and a portion on interest-only. You chip away at some of the capital while keeping payments below a full repayment deal, and higher loan-to-value limits often apply than for pure interest-only. UK Finance counted around 156,000 part-and-part loans worth £40 billion at the end of 2025.
Interest-Only In and Near Retirement
A retirement interest-only (RIO) mortgage lets older borrowers pay interest for life, with the capital repaid when the home is eventually sold on death or a move into long-term care. Because you service the interest, the debt never grows, unlike a lifetime mortgage (equity release) where interest rolls up and compounds. For many borrowers a RIO preserves more equity for family, but the right answer depends entirely on circumstances and both routes need proper advice.
The Maturing Interest-Only Generation
UK Finance data from June 2026 shows around 445,000 pure interest-only loans worth £99 billion still outstanding, with 60,000 due to mature by the end of 2027 and some 15,000 already past term. If your interest-only mortgage is approaching its end date without a complete repayment plan, do not wait for the lender’s letter. Options usually exist, including remortgaging, part-and-part, extending the term, a RIO or a planned sale, and they are all easier with time on your side. See our remortgage service, or the buy-to-let hub for landlord interest-only.
A Note on the Mortgage Charter
If you are struggling with payments, most lenders signed the Mortgage Charter, which lets you switch to interest-only for six months without an affordability check. Be aware that afterwards your payments rise above where they started, because the same balance must be repaid over a shorter remaining term. It is a breathing-space tool, not a saving.
Rates and figures correct as of August 2026, shown for illustration only and not a personal recommendation. Your home may be repossessed if you do not keep up repayments on your mortgage.
You will find more explainers like this among my general mortgage guides.
Need Personal Mortgage Advice?
Every buyer’s situation is different. While this guide explains the general rules, the right mortgage for you depends on your income, deposit, credit history and future plans. If you’d like tailored advice, I’m here to help, with whole-of-market coverage.
