Cashback Remortgages · Mortgage rates
Interest-Only vs Repayment Mortgages
On a repayment mortgage each payment reduces the balance; on interest-only you pay only the interest and must repay the capital separately. The difference is fundamental.
The key difference
Repayment clears the balance by the end of the term, so payments are higher but the debt reduces. Interest-only has lower payments but leaves the full balance to repay at the end, needing a credible strategy.
Interest-only is common in buy-to-let but restricted and closely assessed on residential mortgages.
The repayment plan
Residential interest-only lenders require an acceptable repayment vehicle, such as investments or downsizing. Without a solid plan, interest-only leaves a large debt at term end.
Sources and further reading
General mortgage information, not a personal recommendation. Lender criteria and scheme rules can change. Ask an adviser about your circumstances and a solicitor or tax adviser about legal or tax questions. Your home may be repossessed if you do not keep up repayments on your mortgage. Most buy-to-let mortgages are not regulated by the FCA.
Discuss the next step for your mortgage
Understand your options before you make a decision.