Interest-Only Mortgage FAQ
General information only. This is not financial advice.
Last reviewed: 2026-06-06
Who qualifies for an interest-only mortgage in the UK?
Interest-only residential mortgages have stricter eligibility than repayment mortgages. Lenders typically require: a clearly documented repayment vehicle to clear the capital at term end; maximum LTV of 75% or lower; and often a minimum income or loan size. Common profiles include high-net-worth individuals, older borrowers planning to downsize, and self-employed professionals with complex income. Retirement interest-only (RIO) mortgages are a separate product for older borrowers with no fixed term end date.
What repayment vehicles are accepted for an interest-only mortgage?
Lenders require a credible plan to repay the outstanding capital at the end of the term. Commonly accepted repayment vehicles include: sale of the mortgaged property; sale of a separate investment property; a stocks and shares ISA or investment portfolio projected to cover the balance; a pension lump sum (typically the 25% tax-free element); an endowment policy (if sufficiently funded); or other significant assets for private bank clients. The vehicle must be evidenced and is assessed for credibility at the outset.
What is the maximum LTV for an interest-only mortgage?
Most mainstream lenders cap interest-only LTV at 75%. Many set lower limits — 50% or 60% — for older borrowers or property-sale repayment vehicles. The lower LTV reflects higher lender risk: because capital is not reduced during the term, the lender's security position does not improve over time as it does on a repayment mortgage. Private banks and specialist lenders are sometimes more flexible, particularly for high-net-worth clients with strong repayment vehicles.
Can a self-employed borrower get an interest-only mortgage?
Yes. Self-employed borrowers can access interest-only mortgages through specialist lenders and private banks. The same income assessment methods apply — SA302s, company accounts, or day-rate annualisation. An interest-only structure can actually improve affordability for complex income cases because monthly payments are lower than a repayment equivalent. A specialist broker can match your income type with lenders who offer both interest-only terms and flexible self-employed underwriting.
Can I switch from interest-only to a repayment mortgage?
Yes. Most lenders allow switching from interest-only to repayment, either at product renewal or mid-term. The switch increases monthly payments because you begin repaying the capital as well as the interest. If you are within a fixed-rate deal, check whether your lender charges a fee for mid-term structural changes. Switching eliminates the risk of a capital shortfall at the end of the term and can be a useful strategy as your financial situation evolves.
What is a retirement interest-only (RIO) mortgage?
A retirement interest-only (RIO) mortgage is for older borrowers (typically 55+). It has no fixed end date — the capital is repaid when you die, move into long-term care, or sell the property. Unlike standard interest-only mortgages, no separate repayment vehicle is required: the property is the exit. Monthly payments cover interest only, which must be affordable from pension or other income. RIO mortgages are FCA-regulated and require specialist advice. They are a distinct alternative to equity release for borrowers who can sustain monthly interest payments.
Risk warning
Your home may be repossessed if you do not keep up repayments on your mortgage. With an interest-only mortgage, you must ensure you have a credible plan to repay the capital at the end of the term.
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