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What is an interest-only mortgage?

An interest only mortgage means your monthly repayments are only paying back the interest on the mortgage. You will not be paying off the original loan amount (the capital).

At the end of the mortgage term, you will be required to pay back the full amount of the loan.

The benefits of this are much lower monthly repayments, as you are just paying the interest, but are typically not suitable for most people, but very common with buy-to-let mortgages.

When you pay back the loan amount as well as the interest, it’s called a repayment mortgage.

Nuts About Money tip

Even if you think interest only is right for you, it might be worth speaking to a mortgage adviser to make sure.

Learn more about mortgages.

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