What's an interest-only mortgage?

In most cases, yes. But check your mortgage terms first. Switching to a repayment basis will increase your monthly payments, sometimes significantly. Your lender will need to reassess affordability.

If you want to switch gradually, many lenders let you convert part of the mortgage to repayment while keeping the rest on an interest-only basis - sometimes called a part-and-part mortgage.

Your monthly payments alone do not build equity. However, if your property increases in value over time, you will gain equity through that appreciation.

For example: borrow £200,000 against a property worth £250,000, and if the property rises to £320,000 over the term, you would have significantly more equity. The risk is that property values can also fall.

This is a serious situation. Your options include: asking your lender to extend the term (not guaranteed); switching to a repayment mortgage (higher monthly payments); selling the property and using the proceeds to clear the debt; or downsizing and using the surplus to repay the loan.
None of these are comfortable positions to be in near retirement. This is why having a credible, well-funded repayment vehicle - and reviewing it regularly - matters so much.

No. Interest-only and repayment describe how you pay back the loan. Fixed rate and tracker describe how your interest rate is set. These are completely separate features.

You can have an interest-only mortgage with a fixed rate, or with a tracker rate. Most lenders offer both combinations.

It is possible, but very difficult in practice. Most lenders do not offer interest-only mortgages to first-time buyers. You are unlikely to have a credible repayment vehicle in place, and you typically have a smaller deposit too.

If you are buying your first home, a repayment mortgage is almost always the more suitable and accessible option but you should always seek advice from a mortgage adviser.

Yes, in principle. You will typically need at least two to three years of tax returns or accounts to evidence your income. Lenders take a cautious approach to irregular income, so having a mortgage broker help present your case can make a real difference.

Yes. Most lenders set a maximum age at the end of the mortgage term, typically between 70 and 75.

For older borrowers, shorter terms are more common. Retirement Interest-Only (RIO) mortgages also exist, designed specifically for members later in life.

Lower monthly payments mean better net rental yield. If a landlord collects £1,200 per month in rent and the mortgage costs £700, they have a healthy monthly surplus. On a repayment mortgage, that surplus shrinks considerably.

Most landlords also intend to sell the property at the end of the term, often after significant capital growth, and use the sale proceeds to repay the loan.

A Retirement Interest-Only (RIO) mortgage is designed for borrowers typically aged 55 and over. You pay just the interest each month. The capital is cleared when you die, move into long-term care, or sell the property, rather than at a fixed end date.

RIO mortgages were introduced by the FCA in 2018 to give older borrowers an alternative to equity release.

With a RIO mortgage, you make monthly interest payments throughout the loan. The capital is repaid from the sale of the property when you die or move into care.

With a lifetime mortgage (equity release), you typically make no monthly payments. Interest compounds and rolls up against the value of your home, which can significantly reduce the inheritance you leave behind.

Both products require regulated financial advice before proceeding.

If the mortgage is in joint names, you are both jointly and severally liable for the full debt. A separation does not remove either of you from it. You would need to remortgage into one name, sell the property, or reach a formal arrangement with your lender. If the repayment vehicle was tied to both incomes or both pension pots, that plan may need to be rethought entirely.

Possibly, but this depends on your mortgage product. Many interest-only mortgages carry an Early Repayment Charge (ERC) during the initial fixed or tracker period. Paying off the capital early could trigger a charge of 1% to 5% of the remaining loan. Once you move onto a standard variable rate, ERCs usually no longer apply.

On a repayment mortgage, falling house prices are damaging but your growing equity from monthly payments provides some cushion. On an interest-only mortgage, there is no such cushion. Your debt stays fixed while your asset value falls. In extreme cases this results in negative equity, where you owe more than the property is worth.

In unusual circumstances, yes. Lenders can demand early repayment if you breach the mortgage terms - for example by failing to maintain buildings insurance, letting the property deteriorate, or if you misrepresented your repayment vehicle at application.

If you die before the mortgage term ends, the outstanding capital becomes a debt of your estate. Your beneficiaries or executor will need to repay it, typically by selling the property. Life insurance, sufficient to cover the outstanding mortgage balance, is an important consideration for any interest-only borrower.

Because you have made no capital repayments, your loan-to-value ratio does not improve through your payments alone. If property values have not risen enough, you may have a worse LTV than expected. Lenders will also reassess your repayment vehicle at remortgage stage, and if it has underperformed, some may decline to offer a new interest-only deal.

Many interest-only mortgages are portable, but the lender will reassess your application and repayment vehicle. If the new property costs more, you may need additional borrowing on different terms. If the mortgage is not portable, moving could trigger an Early Repayment Charge.