Repayment or interest only mortgages?

Essential advice from the Mortgage Advice Bureau at Manning Stainton for first time buyers

There are two methods to repay your mortgage: ‘repayment’ and ‘interest only’. Which is right for you?

Repayment mortgages

With a repayment mortgage your monthly payments to the lender go towards reducing the amount you owe as well as paying off interest they charge. This means that each month you’re paying off a small part of your mortgage.


It’s a clear approach, you can see your mortgage getting smaller and provided you maintain the required payments, you also have the certainty your mortgage will be repaid at the end of the term.


At the start, most of your payments go towards paying off the interest on your mortgage, which means in the early years, the amount you owe won’t reduce by very much.

Interest only mortgages

These are now only offered with very strict criteria and are not available to everyone. With an interest only mortgage you only pay the interest charged, so you’re not actually reducing the loan itself. You’ll need to have a realistic and feasible arrangement in place to repay your loan at the end of the term, for example, investment or savings plan. Most lenders will want to see proof of these.


If the savings or investment plan you choose performs well, then you could pay off your mortgage earlier compared to a repayment mortgage. At the end of the mortgage term there may be a lump sum available after the mortgage has been repaid.


Very few investments or savings plans are guaranteed to repay your mortgage in full. If your savings or investment plan doesn’t cover the full amount, you’ll be responsible for paying the difference. Your mortgage lender can demand repayment, and they’ll charge you interest on any outstanding balance until it’s repaid.

Need mortgage advice?

Contact Jo Murgatroyd at the Mortgage Advice Bureau at Manning Stainton. She’s a whiz at mortgages and has access to over 90 lenders and thousands of mortgage products.

Reach her by emailing [email protected] or call 0113 252 2290. Alternatively, our Sales Advisors can introduce you!



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