How this calculator works
This calculator runs the same mortgage amount, rate, and term through both mortgage types and shows them side by side. For a repayment mortgage, it uses the standard amortising-loan formula, where each payment covers interest and a slice of capital:
M = P × r × (1+r)n ÷ ((1+r)n − 1)
For an interest-only mortgage, the monthly payment is simply the interest on the full, unchanged balance every month: P × r. Because no capital is ever repaid, the balance stays at the original loan amount for the whole term, and the entire amount is still owed — and due in full — at the end. The "total cost" shown for interest-only therefore adds the entire original loan amount back in on top of total interest paid, since it still has to be repaid somehow.
Worked example
On a £250,000 mortgage at 4.75% over 25 years: the repayment mortgage costs about £1,425 a month, with total interest of roughly £177,590 and a total cost (interest plus capital) of about £427,590. The interest-only mortgage costs about £990 a month — around £436 less — but because the £250,000 balance never reduces, total interest comes to roughly £296,870 over the same 25 years, and since the full £250,000 is still owed at the end, the combined total cost is about £546,870 — around £119,290 more than the repayment option over the life of the mortgage.
What affects your result
- Interest rate — a higher rate widens the monthly payment gap between the two options, since interest-only pays that rate on the full balance throughout.
- Term length — a longer term lowers the repayment mortgage's monthly payment (spreading capital repayment further) but increases interest-only's total interest, since interest keeps accruing on the full balance for longer.
- Loan amount — both monthly payments and the total cost gap scale roughly proportionally with how much you borrow.
- Your repayment vehicle — for interest-only, whether your savings, investments, or pension actually grow enough to repay the balance at the end materially affects the real-world cost, which this calculator can't predict.
A note on accuracy
Both schedules are computed on full, unrounded figures with rounding applied only for display. This calculator compares the pure mechanics of interest-only versus repayment mortgages — it doesn't model investment growth on an interest-only repayment vehicle, tax treatment, or fees, and interest-only lending in the UK is subject to stricter affordability and repayment-vehicle checks by lenders. For official guidance, seeMoneyHelperand the Financial Conduct Authority.