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03: Interest only mortgages

Interest only mortgages are very simple. Each month, you pay the lender interest on the capital outstanding. At the end of the mortgage term, you then pay off the mortgage capital from one or more of:

  • The proceeds of an endowment insurance policy.
  • The tax-free cash from a pension scheme.
  • Selling investments.
  • Some other source – which may include remortgaging.


In some cases, a mortgage may be part capital and interest and part interest only. In effect, each part is calculated separately, although you will usually just pay one monthly payment to the lender.

Which is better – capital and interest or interest only? There is no right answer to that question – it depends on your individual circumstances and on your attitude to risk. As financial advisers we can help you to decide what is most appropriate for you.Last Updated 

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The precise amount will depend on your circumstances and/or amount of borrowing. We will notify you of any costs before any advice is provided.