Interest-only or repayment mortgage?

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Interest-only mortgage

Your mortgage is probably one of your largest financial commitments. So given the current cost of living crisis, you might be looking at ways to reduce your monthly payments. In this scenario, having an interest-only mortgage instead of a repayment mortgage might seem attractive.

With an interest-only mortgage, you only pay the interest charges on your mortgage loan each month. In contrast, with a repayment mortgage, your monthly payments include the interest and an amount toward the balance of the mortgage loan.

When deciding on what type of mortgage is right for you, it’s important to consider the pros and cons of both types of mortgage. Here’s a quick summary.

Interest-only mortgage


  • Your monthly payments will be lower than a repayment mortgage as you’re only paying the interest on your loan.
  • If you can afford to do so, you could invest the money you save each month by not paying off the capital and possibly increase its value.


  • You’ll pay more interest overall as you’re not reducing the loan amount each month.
  • As you’re not making any payments on the capital, you’re not reducing the loan amount.
  • You’ll need to find an alternative way of paying off your mortgage at the end of the mortgage term.
  • You won’t own your home at the end of the mortgage term unless you have an alternative way to clear the loan amount.

Repayment mortgage


  • You pay less interest overall because what you owe decreases every month, so the interest decreases accordingly.
  • If you make all payments, you own your home at the end of the mortgage term.
  • You may qualify for better mortgage deals as your balance falls over the term of your mortgage.


  • Your monthly payments will be higher compared to an interest-only mortgage.

When it comes to mortgages, there’s no one size fits all approach, and what’s right for you comes down to your unique circumstances.

We can help you assess the options and find the right mortgage for you. If you’d like to know more, please get in touch.