Yes, interest-only mortgages are still available but are much less common and come with stricter requirements, often falling into the "non-qualified mortgage" (non-QM) category, requiring strong credit (700+), lower debt-to-income (DTI) ratios, larger down payments (20%+), and ample cash reserves, as lenders need proof of your ability to handle the higher principal payments later. They suit borrowers expecting significant future income or those planning to sell before the principal phase begins, offering lower initial payments but higher future costs.
An interest-only mortgage payment on $200,000 depends on the interest rate, but at 5%, it's around $833/month (just interest), significantly lower than principal & interest payments, though you never build equity and pay more total interest over time, with later payments including principal. For example, at 3.25%, the initial payment is about $542/month for the interest-only period.
Interest-Only Mortgage: Depending upon your credit profile, interest-only loans are available and provide for the payment of interest only for a set period of time, and payments of principal and interest thereafter for the remainder of the loan term.
It might be more difficult to get accepted for an interest-only mortgage, as they're often viewed as higher risk. If you get to the end of your term and your repayment vehicle hasn't performed and doesn't cover the lump sum, you'll either need to sell your home or find another way to repay.
What is a buy-to-let mortgage? They can be either repayment or interest-only mortgages. If it's interest-only, you'll only pay back the interest on your loan each month rather than the money you borrowed, known as the capital. At the end of the mortgage term, you'll then need to repay the capital in full.
What are the benefits of interest-only mortgages? Some people like the flexibility to be able to make lower payments initially, and pay more when their income or savings increase near the end of their mortgage term.
How much deposit is needed for a buy-to-let mortgage. Typically, you'll need 25% or more of the property's purchase price as a deposit for a buy-to-let mortgage.
If you do not feel downsizing is practical for health or other reasons, Martin Lewis thinks a lifetime mortgage is an option to consider, if you seek expert advice on all your options, including any other alternatives, such as entitlement to means tested benefits and taking a lodger to provide extra income, for example ...
Interest-only mortgages used to be easy for banks to resell to other financial institutions. That's no longer the case. Today, this loan type is seen as higher risk. As a result, mortgage lenders often charge higher interest rates than they do for fixed-rate mortgages.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
With interest-only mortgages, you only pay off the interest on the amount you borrow. You use savings, investments or other assets you have (known as 'repayment plans') to pay off the total amount borrowed at the end of your mortgage term.
Who are interest-only loans for?
The 70/20/10 rule for money is a simple budgeting guideline that splits your after-tax income into three categories: 70% for Needs (essentials like rent, groceries, bills), 20% for Savings & Investments (emergency funds, retirement), and 10% for Debt Repayment & Donations (extra debt payments or giving). It balances immediate living costs with long-term financial security, helping you cover necessities while building wealth and paying off liabilities.
Is there an age limit for buy-to-let mortgages? Yes, limits are sometimes set by buy-to-let mortgage lenders. It might surprise you to hear that there can be both upper and lower age limits for applicants—typically 18-75 years of age. However, these age brackets often vary between lenders.
Page updated 25/09/2025. Vida Homeloans has launched a range of 97% loan-to-value mortgages designed to help borrowers get on the property ladder with a 3% deposit.
Banks are generally comfortable lending up to 80% of the value of your home, minus the amount you owe to the bank. In our example, 80% of $750,000 is $600,000, so the useable equity is $200,000. This is the equity that you may be able to leverage as a deposit on an investment property.