Interest Only vs Repayment Calculator
Monthly cost and end-of-term balance comparison.
Compare interest-only vs repayment mortgage costs side by side. See monthly payment difference and outstanding balance at end of term.
What this tool does
This calculator models the monthly payment difference between interest-only and repayment mortgage structures over a fixed term. It takes your loan amount, annual interest rate, and term length, then calculates the monthly payment required under each approach and estimates what balance remains owing at the end of the term under an interest-only structure. The repayment option gradually reduces the principal through each payment, while interest-only payments cover only accrued interest, leaving the full original amount due at maturity. The monthly payment difference between the two types is typically the largest driver of the comparison. This tool illustrates how these structures behave across common scenarios and is provided for educational purposes to show the mechanics of each approach. The calculation does not account for rate changes, fees, payment holidays, or arrangements for repaying the outstanding balance at term end.
Enter Values
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
200,000 at 5% over 25 years: interest-only payment is 833/month with 200,000 owed at the end. Repayment is 1,169/month with 0 owed at the end. Over 25 years, repayment costs more per month but clears the debt; interest-only is cheaper monthly but leaves the full balance. Interest-only demands a clear repayment strategy (investment vehicle, property sale) at term end.
Mortgage structure comparison.
A worked example
Try the defaults: loan amount of 200,000, annual rate of 5%, term of 25. The tool returns 335.85. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.
What moves the number most
The result responds to Loan Amount, Annual Rate, and Term. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the option with the lower calculated total changes.
The formula behind this
Interest-only payment = principal × monthly rate. Repayment payment = standard amortisation formula. Difference is the monthly gap. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.
Stress-testing the plan
Run the calculation at your current rate, then run it again at a rate 2–3 percentage points higher. That's roughly what a product reset could bring at renewal, and it's a useful check on whether you can afford the mortgage in a higher-rate world, not just today's.
What this doesn't capture
The figure excludes arrangement fees, valuation costs, legal fees, insurance, and any early-repayment charges — those can add several thousand to the headline cost. Rate changes at renewal for fixed-term deals will shift the picture further. Use this for the core interest/principal math and add the other costs on top.
Borrowing £200,000 at 5% over 25 years years results in 335.85.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
Interest-only payment = principal × monthly rate. Repayment payment = standard amortisation formula. Difference is the monthly gap.
References
Frequently Asked Questions
Who uses interest-only?
Is interest-only riskier?
Part-and-part mortgages?
Does IO have tax advantages?
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