How interest-only works
You pay only the interest each month, so payments are lower, but the capital remains owed at the end of the term and must be repaid in full. The best interest-only mortgage is one from a lender that accepts your repayment strategy and circumstances — lenders scrutinise this closely.
1. Residential interest-only mortgages
Available from many lenders if you have a credible repayment plan and often a higher minimum income or equity. Best for higher earners, those with investments to repay the capital, or borrowers wanting lower payments with a clear exit.
2. Part-and-part mortgages
A blend of interest-only and repayment, reducing some capital while keeping payments lower than full repayment. Best for borrowers wanting a middle ground between affordability and paying down the loan.
3. Buy-to-let interest-only mortgages
The norm for buy-to-let, maximising monthly cash flow, with the capital repaid by selling or refinancing. Best for landlords focused on rental yield — interest-only is standard in this market.
4. Retirement interest-only (RIO) mortgages
For older borrowers, RIO mortgages charge interest only with the capital repaid when you die, sell or move into care. Best for over-55s wanting low payments — see our over-60s mortgages guide.
Repayment strategies lenders accept
- Sale of investments, ISAs or other property
- Pension lump sums (for suitable terms)
- Downsizing (lenders set rules on this)
- Endowments or other savings vehicles
How to find the best interest-only mortgage
Interest-only criteria vary widely, especially the accepted repayment strategies. A whole-of-market broker matches your plan to a lender that accepts it. Find a mortgage broker through Nesto — free, no obligation.
Frequently asked questions
Can I still get an interest-only mortgage?
Yes — they're available residentially if you have a credible repayment plan, and they're standard for buy-to-let.
What repayment strategies do lenders accept?
Common ones include selling investments or another property, pension lump sums, downsizing, and savings vehicles — each lender has its own rules.
Are payments really lower?
Yes — you pay only interest, so monthly payments are lower, but the full capital remains owed at the end of the term.
What's part-and-part?
A blend of interest-only and repayment — you reduce some capital while keeping payments lower than full repayment.
Do I need a higher income for interest-only?
Often — residential interest-only lenders may set higher minimum incomes or equity requirements alongside an accepted repayment plan.