Interest only keeps monthly payments low, but the capital must be repaid at term end via investments, savings, or sale—so a robust strategy is essential.
How it works
Monthly payments cover interest only; balance remains. At maturity, repay the capital in full using an approved repayment vehicle or disposal plan.
Who qualifies
Borrowers with strong equity and credible repayment plans, buy‑to‑let landlords, high‑net‑worth clients; criteria are tighter than repayment mortgages.
Benefits
Lower monthly outgoings; flexibility to overpay capital ad‑hoc; potential to invest the payment difference; attractive for BTL cash flow.
Risks
Capital remains outstanding; overall interest could be higher; lender scrutiny is tougher; property price risk if planning to sell.
Alternatives
Full repayment mortgages, part‑and‑part (split), or offset structures.
Real‑world example
£150k IO payment at 5% ≈ £625/m vs ~£1,125–£1,170/m on repayment. The £500 saving could be invested to build the capital pot (investment risk applies).
Why Everest Mortgages
We identify lenders who accept your repayment strategy, compare IO vs repayment value, and guide landlords/investors.
Final thoughts
Powerful in the right hands; risky without a plan. Seek advice.
Considering interest only? Get a free review at Everest‑Mortgages.co.uk.
