An interest only mortgage is a type of mortgage where the borrower only pays the interest on the loan, and not any of the capital. This means that the monthly payments are lower than with a standard repayment mortgage, but the full loan amount still needs to be paid off at the end of the term.
With an interest only mortgage, you will need to have a plan in place to repay the full loan amount at the end of the term. This could involve making additional payments into your mortgage each month, or putting money aside so that you have the funds available when you need them.
It’s important to remember that with an interest only mortgage, your monthly payments will not reduce the overall amount you owe on the loan. So, if you’re not sure that you’ll be able to afford the full loan repayment at the end of the term, an interest only mortgage may not be the best option for you.
Interest only mortgages are available in the UK, but they are not as popular as standard repayment mortgages. They can be a good option for borrowers who want to keep their monthly payments low, but need to be sure that they can afford the full loan repayment at the end of the term.
If you currently have a capital & interest mortgage then it may be possible to change your mortgage over to interest only.
If you’re interested in an interest only mortgage, it’s important to speak to a mortgage broker to find out if this type of mortgage is right for you.
Our Guide to Mortgage Types explains the main repayment methods for a mortgage.
You will find more useful information in our article: “What are the different mortgage repayment methods?“
