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Interest-only vs repayment

Interest-only vs repayment (and invest the difference)

See the monthly payment gap between a repayment mortgage and interest-only, and what investing the difference could grow to over time.

Example presets

These examples show a balanced case, a stronger investment-return case, and a tighter-payment case.

Compare repayment with interest-only

This calculator shows the monthly payment gap and asks what might happen if that gap were invested instead.

Mortgage balance (£)

How much you owe right now.

Mortgage rate (% per year)

Current annual interest rate.

Term (years)

Years left on the mortgage (max 100).

Repayment mortgage monthly payment

Edit manually

Monthly payment (£)

Auto-calculated from balance, rate, and term.

Interest-only monthly payment

Monthly interest-only (£)

Calculated as balance × rate / 12.

Expected investment return (% per year)

Average yearly growth you expect.

Monthly amount you would invest (£)

Difference between repayment and interest-only payments.

Investment wrapper

ISA

Tax-free growth and withdrawals.

Pension

Assumes 20% uplift on contributions.

Taxable

Assumes 20% tax on gains.

Monthly payments at a glance

Repayment payment

£1,112

Estimated monthly repayment.

Interest-only payment

£750

Monthly interest-only amount.

Monthly amount available to invest

£362

Repayment minus interest-only (never below zero).

Could the investment pot clear the mortgage?

Estimated payoff date

Nov 2046

This is the first point where the projected investment pot matches the mortgage balance.

Time needed to get there

20 years 8 months

Measured from today using your current monthly gap and return assumption.

Investment pot by term end

£294,684

Projected by the end of the remaining 25-year mortgage term.

Could it clear the mortgage within term?

Yes

On these assumptions, the investment pot is large enough by the end of the mortgage term.

The projected payoff date falls before the mortgage term ends.

Yearly breakdown

End-of-year figures so you can see when the pot catches up with the mortgage balance.

Year	Investment pot	Mortgage balance	Could it clear?
Year 1	£4,508	£200,000	No
Year 2	£9,342	£200,000	No
Year 3	£14,526	£200,000	No
Year 4	£20,084	£200,000	No
Year 5	£26,044	£200,000	No
Year 6	£32,434	£200,000	No
Year 7	£39,287	£200,000	No
Year 8	£46,635	£200,000	No
Year 9	£54,515	£200,000	No
Year 10	£62,964	£200,000	No
Year 11	£72,024	£200,000	No
Year 12	£81,738	£200,000	No
Year 13	£92,155	£200,000	No
Year 14	£103,325	£200,000	No
Year 15	£115,303	£200,000	No
Year 16	£128,146	£200,000	No
Year 17	£141,918	£200,000	No
Year 18	£156,685	£200,000	No
Year 19	£172,520	£200,000	No
Year 20	£189,500	£200,000	No
Year 21	£207,707	£200,000	Yes
Year 22	£227,230	£200,000	Yes
Year 23	£248,165	£200,000	Yes
Year 24	£270,613	£200,000	Yes
Year 25	£294,684	£200,000	Yes

Risk check (plain English)

Investments can go up and down.
You still owe the full mortgage balance on interest-only.
Lenders often require a clear plan to repay the balance later.
Mortgage rates and investment returns can change.

Quick rule-of-thumb check (not advice)

Interest-only mortgages can work for some people, but they are not for everyone. This quick checklist helps you think through the basics.

You have a stable income and can handle changes in payments.
Interest-only payments can change if rates move.
You already have an emergency fund (e.g. 3–6 months of expenses).
A buffer helps you keep investing if costs rise.
You are comfortable seeing investments go up and down.
Returns are not guaranteed; values can drop.
You have a clear plan for repaying the mortgage balance later.
Interest-only means the full balance still needs paying back.
You are disciplined enough to actually invest the monthly savings.
Skipping investments removes the whole point of the strategy.

If you agree with most of these points, interest-only might be something to explore further.

If several of these feel uncomfortable, a repayment mortgage is often the simpler and safer option.

This is a general guide for learning purposes only — it’s not financial advice.

Simple takeaway

With these assumptions, the investment pot could reach the mortgage balance around Nov 2046, which is within the remaining mortgage term.

This is a simplified illustration. Investments can rise or fall, and you remain responsible for repaying the mortgage balance.

Example scenario

Here is a realistic example of comparing repayment with interest-only and investing the monthly gap.

Mortgage balance: £200,000
Mortgage rate: 4.5% over 25 years
Interest-only payment gap invested monthly
Investment wrapper: ISA at 7% assumed growth

This helps show whether the lower monthly cost of interest-only could realistically build a pot big enough to clear the mortgage later.

Guide

How to read this calculator

Use this section to understand the trade-offs, common pitfalls, and what to look at first.

What this calculator does

It compares a repayment mortgage to an interest-only mortgage and shows what could happen if you invest the monthly savings from paying interest-only.

Repayment vs interest-only (simple explanation)

Repayment: each payment covers interest and also reduces the balance, so the debt falls over time.

Interest-only: each payment covers just the interest, so the balance stays the same unless you pay extra or invest separately.

Why overpaying early can matter

At the start of a repayment mortgage, most of your payment goes to interest, not the balance.

Overpaying early can cut the balance sooner, which means less interest added over the years.

When interest-only might be considered

Only if you have a clear, realistic plan to repay the full balance later.

It usually needs discipline and a believable investment or repayment plan.

It is not suitable for everyone and can carry extra risk.

Common mistakes

Thinking investment returns are guaranteed.

Forgetting fees, taxes, or inflation when planning.

Ignoring that the full mortgage balance still needs to be repaid.

Frequently asked questions

Is interest-only cheaper?: Monthly payments are lower, but you still owe the full balance and carry more risk if investments underperform.
Is investing the difference guaranteed?: No. Investments can go up or down, so the pot may end up smaller or larger than expected.
When might repayment be safer?: When you want certainty, prefer reducing debt, or don’t want to depend on investment returns to clear the mortgage.

For education only — not financial advice.

Read more about our approach in the disclaimer and about pages.

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