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Apply for an interest-only mortgage with L&C

If you’re looking for an interest-only mortgage, we’re here to help.

Whether over the phone, or using our online Mortgage Finder, it’s easy to get your mortgage journey started. Just answer all the questions, such as how long you want your mortgage to last, how much deposit you have and how much you’re looking to borrow, and we’ll narrow down your search to all the deals you could qualify for.

Your expert adviser will be able to talk you through your options and help you decide whether an interest-only mortgage is right for you. Once we’ve found the right deal and you’re ready to go ahead, we’ll guide you through the application process from start to finish, and you can track its progress via the online portal 24/7.

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Interest-Only Mortgages Explained

An interest-only mortgage is a type of mortgage where your monthly payments only cover the interest you owe, and not the capital you’ve borrowed. At the end of the term you’ll have to repay the full amount borrowed. Most people use savings or investments to pay off what they owe - bear in mind that most lenders will ask to see evidence of how you intend to do this before agreeing to the mortgage.

The main advantage of this type of mortgage is that your monthly payments will be lower compared to a repayment mortgage, where you repay both the capital and interest each month.

Of course, the obvious disadvantage of an interest-only mortgage is that when you get to the end of your term, you have to pay back a lump sum to cover the amount you originally borrowed. Your lender may check in throughout your mortgage term to ensure that you’re on track to being able to pay it off via your repayment vehicle, whether that is investments, ISAs, savings or the sale of another property.

Interest-Only Mortgage Process

With an interest-only mortgage, you’ll repay the interest on your loan every month, before repaying the full amount borrowed at the end of your mortgage term. If you think this might be the right solution for you, you can read more about how interest-only mortgages work and find out more about the different types available from L&C.

For more information on interest-only mortgage rates and deals, simply enter your details and take a look at what options might be available for you.

Types of Interest-Only Mortgages

These mortgages are available for both owner-residents and landlords, although it may be easier to get a Buy to Let interest-only mortgage. This is because landlords typically treat the property as an investment rather than their home, and so lenders may have less stringent criteria for interest-only buy to let mortgages than residential ones.

This may be appealing to landlords looking to keep their property costs to a minimum. By paying back only the interest every month, it keeps your monthly outgoings down.

Older people may also be suited to a retirement interest-only mortgage. These are designed for older homeowners, and allow people to keep their home but only pay monthly mortgage interest payments until they die or go into long-term care. At that point, the property is sold and the capital is repaid to the lender.

As you only pay interest every month, repayments are relatively low which can give retired people financial flexibility - and there’s no need to worry about finding a lump sum to pay back the mortgage at the end of the term as with a standard interest-only mortgage. However, the capital does still need to be repaid which could have an impact on any inheritance you might want to leave your loved ones.

Interest-Only Mortgage Eligibility Criteria

For both residential and Buy to Let interest-only mortgages, you’ll need to have a large deposit. This is typically at least 25% of the property’s value, and in some cases lenders may ask for 40%. Lenders may also have minimum income requirements and you’ll have to prove that you have a solid strategy for repaying the capital owed at the end of your term - this could be through the sale of a second property, investments or savings.

For a retirement interest-only mortgage, you’ll need a good credit history and a retirement income that can easily cover your monthly interest payments. It’s likely that lenders will also want to see that you have plenty of equity in your property already. You can check if you are eligible for a residential interest-only mortgage online with L&C before making your application.

Finding the best Interest-Only Mortgage Deal

Once you’ve used our Eligibility Engine to check whether you’re able to get this type of mortgage, L&C will scour the web to find the best interest-only mortgage rates for your personal circumstances.

We have access to thousands of deals across dozens of lenders so whether you’re looking to buy a residential property or want to find the best Buy to Let interest-only mortgage rates, we can help.

To increase your chances of getting a good deal, you should ensure you have saved as big a deposit as possible. You should check your own credit report before you make your mortgage application to check for any discrepancies, as even seemingly small issues can hamper your application. If you notice any mistakes, apply to have them rectified before proceeding.

As with any other type of mortgage, lenders will want to see a record of your incomings and outgoings, so you should be prepared to provide bank statements as well as proof of income.

Interest-Only Mortgage Repayment Plan

When your mortgage term finishes, with an interest-only mortgage, you must repay the full amount originally borrowed. If you’re not sure that you’ll be able to do so, there are options before you reach the end of your term as you may be able to switch to a repayment mortgage instead, or make overpayments to reduce the amount you owe.

If you want to pay off your mortgage early or overpay, you may have to pay an Early Repayment Charge (ERC). Check the terms of your mortgage to see if this applies to you, and bear in mind that ERCs can be a significant expense.

However, most lenders do allow you to make overpayments, usually of up to 10% of the mortgage value each year without an extra charge. This can help you to reduce the amount you owe gradually whilst avoiding ERCs.

Apply for an Interest-Only Mortgage with L&C

Whether over the phone or using our online Mortgage Finder, it’s easy to get started with L&C. Just answer all the questions like how long you want your mortgage to last, how much deposit you have and how much you’re looking to borrow, and we'll narrow down your search to all the deals you could qualify for.

Your expert adviser will talk you through your options and help you to decide whether an interest-only mortgage is right for you. Once we’ve found the right deal and you’re ready to go ahead, we’ll guide you through the application process from start to finish and you can track its progress online 24/7.

Interest-only mortgage FAQs

What is an interest-only mortgage?

An interest-only mortgage enables you to only pay back the interest you owe each month rather than any of the capital you’ve borrowed. This means your monthly payments won’t reduce your debt, and instead the capital must be repaid in full at the end of the mortgage term. You can read more in our guide ‘What is an interest-only mortgage?’

Can I extend my interest-only mortgage term?

You may be able to extend your interest-only mortgage term but you’ll have to check with your lender to see if they’ll allow this.

Can you still get interest-only mortgages?

Many lenders offer interest-only mortgages, but to qualify you’ll need to be able to prove that you’ve got a savings plan in place to repay the capital at the end of the mortgage term. Options include a regular savings plan, an investment portfolio or pension.

What happens at the end of an interest-only mortgage?

When an interest-only mortgage finishes, homeowners must repay the amount they originally borrowed. If you’re coming to the end of your mortgage and are concerned about not being able to pay it off, the good news is that there can be other options, including switching to a repayment mortgage or remortgaging to cut costs. You can read more in our guide ‘What is an interest-only mortgage?’

Can I pay off my interest-only mortgage early?

If you want to pay off your interest-only mortgage early but haven’t come to the end of your current mortgage deal, you may have to pay an Early Repayment Charge (ERC). You can check the terms of your mortgage to see if this applies to yours. Most lenders will allow you to make overpayments, typically of up to 10% of the mortgage value each year without charge, which can help you to reduce your debt gradually.

Can you get interest-only holiday let mortgages?

If you’re buying a holiday let - that is, a home that’s rented out to tourists as holiday accommodation for all or part of the year - then you’ll need a holiday let mortgage. This can either be a repayment mortgage or an interest-only one, depending on your needs and circumstances. Get in touch with L&C today and we’ll find the best deals for your situation.

How do I qualify for an interest-only mortgage?

Lenders have strict eligibility criteria for interest-only mortgages, and you’ll be expected to show that you have a solid repayment plan for when your mortgage term comes to an end. If you’re planning on renting out your home, you may qualify for a Buy to Let interest-only mortgage. We can help you to find the right deal for your needs, whether you’re looking for a residential mortgage or are planning to rent out your property.

How much does a 100k interest-only mortgage cost?

Mortgage rates vary between lenders, so the cost of a £100,000 interest-only mortgage is specific to circumstances and the particular mortgage deal you have.. With an interest only mortgage, your monthly repayments will be only the interest on the loan and you’ll need a separate plan for repaying the loan itself at the end of your mortgage term. You can see the latest rates and costs on our best buy tables here.

You might also be interested in:

How does Buy to Let work?
What is an interest-only mortgage?
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