Interest-only borrowing reduces the monthly payment by deferring capital repayment, but the trade-off in total cost and the payment shock when the repayment phase begins are not always obvious from the headline figures. A borrower considering an interest-only or part-and-part structure on a secured loan, a HELOC draw period, or a bridging arrangement needs to see both structures side by side to understand what the lower initial payment actually costs over the full term.
This tool compares full repayment against an interest-only or part-and-part structure on the same loan amount, rate, and term. It shows the monthly payment in each phase, the total interest under each structure, the payment shock when transitioning from interest-only to repayment, and the extra interest cost of the interest-only approach. For full interest-only arrangements, it flags the capital balance that remains outstanding at the end of the term. All figures are illustrative and the tool does not constitute financial advice.
At a Glance
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Interest-only reduces the monthly payment but increases the total cost. The gap widens with longer IO periods.
During an interest-only period, the monthly payment covers only the interest charge. No capital is repaid, so the outstanding balance does not reduce. The monthly cost is lower, but total interest paid over the full term is higher because the full balance accrues interest for longer. The cost bars in the tool make this trade-off visible: the interest portion of the IO structure is always larger than the full repayment equivalent.
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The payment shock is the jump in monthly cost when the IO phase ends. It is often larger than borrowers expect.
On a part-and-part arrangement, the repayment phase monthly figure is higher than it would be on a full repayment loan of the same total term, because the full balance must be repaid over fewer remaining years. The payment shock tile shows the exact monthly increase. A borrower on a 15-year term with a 5-year IO period faces a 10-year repayment window for the full balance, which produces a higher monthly figure than 15 years of full repayment from day one.
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Full interest-only leaves the entire capital balance outstanding. A repayment strategy is required.
Setting the interest-only period equal to the full term produces a full interest-only structure where no capital is repaid during the loan. The full balance must be repaid at the end, typically through property sale, refinancing, or other means. Lenders offering interest-only products require a credible exit strategy before approving the loan. The tool flags this with a capital warning panel when the IO slider reaches the full term.
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Part-and-part is common in second charge lending, HELOC products, and bridging finance.
Part-and-part structures are not unusual in the UK secured lending market. Some second charge mortgage products offer an initial interest-only period before switching to repayment. HELOC draw periods are effectively interest-only. Bridging loans typically retain interest rather than requiring monthly servicing. This tool models the cost impact across any of these structures by adjusting the IO period slider.
Interactive tool
Interest-only vs repayment comparator
Compare the monthly cost, total interest, and payment structure of full repayment against an interest-only or part-and-part arrangement on the same loan.
Your data stays private — nothing you enter is stored, transmitted, or accessible to anyone. All calculations run entirely in your browser.
Set to 0 for full repayment only. Set equal to the term for full interest-only.
Loan payment structure over the term
Full repayment
With interest-only period
Outstanding balance over time
LTV impact: how each structure affects your equity position
Set to 0% for a static property value. Property appreciation is not guaranteed.
What if you invested the IO monthly saving?
Capital repayment required at end of term
Interest-only calculations assume no capital is repaid during the interest-only period. Retained interest calculations assume interest compounds monthly on the outstanding balance with no monthly payments made. Part-and-part calculations assume the full balance (including any accrued retained interest) is repaid over the remaining repayment period. Investment projections assume a constant annual return compounded monthly and do not account for tax, charges, or market volatility. LTV figures assume static property value unless appreciation is set above 0%, in which case a constant annual growth rate is applied — property appreciation is not guaranteed. The rate offered on an interest-only or part-and-part product may differ from a full repayment product. This tool does not constitute financial advice. All figures are illustrative only.
About this tool
What it compares
Full repayment vs interest-only or part-and-part on the same loan
Enter a loan amount, APR, and term, then adjust the interest-only period from zero (full repayment) up to the full term (full interest-only). The tool calculates the monthly payment in each phase, the total interest under each structure, and the payment shock when transitioning. Two side-by-side cards show the comparison, with cost breakdown bars and a capital warning for full interest-only.
Key features
Balance trajectory chart, LTV tracking, and invest-the-saving scenario
A balance trajectory chart shows both structures side by side over time: the repayment line declining month by month while the IO line stays flat. An LTV panel shows how each structure affects the equity position at key points, using a property value input. An invest-the-saving scenario models whether investing the monthly IO saving at a chosen return rate would offset the extra interest cost. Payment timeline, diff tiles, cost bars, and capital warning complete the picture.
How to use the interest-only vs repayment comparator
The tool is built around a single comparison: the same loan modelled as full repayment alongside the same loan with an interest-only element. All six sliders interact in real time, so moving any input immediately updates every output. The most revealing exercise is to hold the loan amount and rate constant while slowly increasing the interest-only period from zero to the full term and watching the balance trajectory chart, cost bars, and payment shock tile change.
Set the loan amount, APR, and total term
Use the top three sliders to define the loan. These figures apply to both the full repayment and interest-only structures so the comparison is on a like-for-like basis. For a secured loan, use the amount and illustrative rate from a quote or from the secured loan calculator. For a HELOC, use the draw amount and the HELOC rate. For bridging, use the gross loan amount and the annualised rate. Select “Added to balance (retained)” in the interest type toggle, as bridging interest is typically retained rather than serviced monthly — this produces a higher and more accurate cost figure because retained interest compounds.
Adjust the interest-only period
The fourth slider sets the interest-only period in years. At zero, both columns show full repayment. As the slider increases, the IO structure card shows the lower monthly payment during the IO phase and the higher payment during the repayment phase. Setting it equal to the total term models a full interest-only arrangement with no capital repayment during the loan. The label below the slider shows which structure is being modelled: full repayment, part-and-part, or full interest-only.
Review the comparison cards, chart, and cost bars
The two side-by-side cards show the monthly payment, total interest, and total repayable under each structure. The balance trajectory chart below shows the outstanding balance month by month for both structures overlaid on the same axes: the repayment line declines steadily while the IO line stays flat during the IO phase. The cost breakdown bars show the principal-to-interest split visually, making it clear how much more of the total goes to interest under the IO structure.
Check the LTV impact and the invest-the-saving scenario
The LTV panel appears when an IO period is set and shows how each structure affects the loan-to-value ratio at the start, at the end of the IO period, and at the end of the term. Use the property value slider within the panel to model your situation. Below it, the invest-the-saving panel takes the monthly IO saving and models what it would be worth if invested at a chosen annual return rate, then compares the investment value against the extra interest cost of the IO structure. This directly tests the most common argument for choosing interest-only: that the saving can earn more elsewhere than the interest it costs.
How interest-only lending works
On a standard repayment loan, each monthly payment covers two things: a portion of the interest that has accrued on the outstanding balance, and a portion of the capital itself. Over the full term, every pound of the original loan is repaid and the balance reaches zero. On an interest-only loan, the monthly payment covers only the interest. The capital balance does not reduce at all during the interest-only period. This is why the monthly payment is lower: it is doing less work.
The cost of this lower payment becomes visible in two places. First, total interest paid is higher because the full balance continues to accrue interest for the entire IO period rather than declining month by month as it would on a repayment basis. Second, the capital must still be repaid, either through a repayment phase (part-and-part) or in full at the end of the term (full interest-only). The balance trajectory chart in the tool makes this structural difference immediately visible: the repayment line declines month by month while the IO line stays flat, and the gap between the two is the equity that has not been built during the IO phase. The APR on secured loans guide explains how the headline rate translates to actual cost across different loan structures.
Understanding payment shock
Payment shock is the increase in monthly cost when a borrower transitions from an interest-only phase to a repayment phase. On a part-and-part arrangement, the repayment phase payment is calculated by amortising the full original balance over the remaining years of the term. Because those remaining years are fewer than the total term, the monthly figure is higher than it would have been on a full repayment loan from day one. A loan of £40,000 at 7% over 15 years costs approximately £359 per month on full repayment. The same loan with a 5-year IO period costs approximately £233 per month during the IO phase, then rises to approximately £465 per month for the 10-year repayment phase. The payment shock in this example is approximately £232 per month.
Lenders assess affordability based on the repayment phase payment, not the IO phase payment, because the higher figure is the one the borrower must sustain for the majority of the term. A borrower whose budget can comfortably support the IO payment but would be stretched by the repayment phase payment may find that the IO structure does not actually improve their borrowing position in the lender’s assessment. The monthly affordability checker can test the repayment phase payment against the full budget to see whether the post-IO figure is sustainable.
The capital risk of full interest-only
On a full interest-only loan, the entire capital balance remains outstanding at the end of the term. The borrower has paid interest for the full duration but the loan has not been reduced by a single pound. This capital must then be repaid, typically through sale of the secured property, refinancing onto a new product, or from other sources such as an investment maturing or an inheritance. Lenders offering interest-only products require evidence of a credible repayment strategy before approval, and the strategy is assessed as part of the affordability decision.
The risk is that the repayment strategy may not materialise as expected. Property values can fall, refinancing may not be available on acceptable terms at the point of maturity, and investments can underperform. A borrower who chose interest-only on the assumption that property value growth would cover the capital may find that the property has not appreciated enough, or that sale is not practical at that point. This is why lenders and the FCA treat interest-only lending with particular scrutiny, especially on regulated products. The guide to risks of secured loans covers the broader risk landscape including repossession, negative equity, and early repayment charges.
Where interest-only structures apply
Interest-only and part-and-part structures appear across several product types in the UK lending market. Some second charge mortgages offer an initial interest-only period, typically one to five years, before the loan converts to repayment for the remaining term. This is common where the borrower’s current cash flow is constrained but is expected to improve, for example because of a salary step-up, a partner returning to work, or an existing debt being cleared during the IO period. The HELOC draw period works on a similar principle: during the draw phase, the borrower may pay interest only on the amount drawn, with capital repayment beginning when the draw period ends. The HELOC draw period planner models the timing of this transition.
Bridging loans typically use retained interest rather than monthly servicing, which means the interest is deducted from the loan advance at the outset or rolled up into the balance. This is functionally an interest-only structure where the capital and accumulated interest are repaid together at the end of the term, usually from the sale or refinancing of the property. The guide to rolled-up, retained, and serviced interest on bridging loans explains the differences between these structures in detail. The LTV panel in the tool shows an often-overlooked consequence of IO across all these product types: during an IO phase, the loan-to-value ratio does not improve because no capital is repaid. A borrower who needs to remortgage at the end of an IO period will have the same LTV as when they started, which may limit the rates available on the next product. The fixed vs variable rate comparator is useful alongside this tool for borrowers deciding between rate types on a product that offers both repayment structures.
Related tools
Repayment modelling
Secured loan calculator
The secured loan calculator models full repayment scenarios across different amounts, terms, and rates with a term comparison table. Use it alongside this tool to see how the repayment-only figures look in isolation before comparing against an IO structure. Use the tool
Rate comparison
Fixed vs variable rate comparator
If you are also deciding between a fixed and variable rate on the same product, this tool models the cost difference under different rate movement scenarios. The rate type and the repayment structure are separate decisions that interact. Use the tool
HELOC draw periods
HELOC draw period planner
If you are comparing interest-only structures on a HELOC product, this tool models the draw period timeline and the transition to repayment. Use it alongside the IO comparator to see the full cost picture across both phases. Use the tool
Bridging interest structures
Rolled-up, retained, and serviced interest
Bridging loans use retained interest rather than monthly servicing, which means interest compounds on the balance. This guide explains the differences between rolled-up, retained, and serviced structures and how each affects the total cost. Read the guide
Not sure what to look at next?
All of our calculators and planning tools in one placeFrequently asked questions
Can I get an interest-only secured loan in the UK?
Interest-only and part-and-part structures are available on some secured loan products in the UK, though they are less common than full repayment products. Availability depends on the lender, the loan-to-value ratio, the borrower’s credit profile, and the strength of the repayment strategy. Specialist second charge lenders are more likely to offer interest-only options than mainstream providers. The product is regulated by the FCA when secured against a residential property, and the lender must assess affordability and the credibility of the repayment plan before approval.
Part-and-part is more widely available than full interest-only on second charge products, because the lender can see that the capital will be fully repaid within the term. Full interest-only is more commonly associated with bridging finance, where the exit strategy (typically property sale or refinancing) is a core part of the product structure. For borrowers exploring whether an IO structure is available for their situation, a broker with access to the specialist second charge market is the most efficient route, because IO availability is lender-specific and not always visible on comparison sites.
Why is the repayment phase payment higher than a full repayment loan over the same total term?
On a part-and-part arrangement, the repayment phase must clear the entire original loan balance over fewer years than the full term. If the total term is 15 years and the first 5 are interest-only, the full balance is amortised over the remaining 10 years. Spreading the same amount over 10 years instead of 15 produces a higher monthly figure. The interest-only phase has not reduced the balance at all, so the repayment phase starts from the same point as the original loan but with less time to clear it.
This is the core trade-off of a part-and-part structure: lower payments at the start, higher payments later. The total interest is also higher because the full balance accrues interest during the IO years without any capital reduction. The payment shock tile in the tool quantifies the exact monthly increase at the transition point, and the cost bars show the total interest difference across the two structures. A borrower choosing part-and-part needs to be confident that the repayment phase figure is affordable, not just the IO phase figure.
What happens at the end of a full interest-only loan if I cannot repay the capital?
If the repayment strategy does not produce the funds to clear the balance at maturity, the lender will typically offer options before taking enforcement action. These may include extending the term, converting to a repayment basis for a further period, or agreeing a partial repayment with a revised plan for the remainder. The specific options depend on the lender and the regulatory context: for regulated residential mortgages and second charges, the FCA requires lenders to treat customers fairly and explore alternatives before repossession.
However, relying on these options is not a substitute for having a credible repayment strategy from the outset. Lenders assess the repayment plan at the point of application precisely to avoid this situation. If the plan was based on property sale and the property has not appreciated as expected, or if it was based on an investment maturing and the investment has underperformed, the borrower may face limited choices at a point of limited flexibility. The guide to what happens if you cannot repay a secured loan covers the full range of outcomes and borrower protections.
Does the tool account for the fact that IO and repayment products may carry different rates?
The tool uses a single APR for both structures to isolate the impact of the repayment type on cost. In practice, interest-only products sometimes carry a different rate from repayment products at the same LTV and credit profile, because the lender is taking on additional risk: the balance does not reduce during the IO period, which means the LTV stays higher for longer. Some lenders price this risk into the rate, while others use the same rate for both structures but apply stricter eligibility criteria for IO.
If you have been quoted different rates for IO and repayment on the same product, you can run the tool twice: once at the repayment rate with the IO slider at zero, and once at the IO rate with the IO slider at your proposed period. Comparing the two total interest figures gives the true cost difference including the rate differential. The APR band cost comparator is also useful for seeing how small rate differences compound over the full term.
Is interest-only always more expensive over the full term?
Yes, in terms of total interest paid, an interest-only or part-and-part structure always costs more than full repayment on the same loan at the same rate over the same total term. This is a mathematical certainty: keeping the balance higher for longer means more interest accrues. The monthly saving during the IO phase does not offset the additional interest over the full term. The cost bars in the tool show this clearly: the interest segment is always larger on the IO structure than on the full repayment structure.
This does not mean IO is always the wrong choice. The value of a lower monthly payment during a specific period may outweigh the additional total cost for a borrower whose circumstances justify the structure. A borrower who needs lower payments for three years while a partner retrains, or while an existing high-rate debt is being cleared, may find that the extra interest is a reasonable cost for the flexibility. The tool shows the exact trade-off so the decision can be made with the full picture rather than on the basis of the monthly figure alone.
Squaring Up
Interest-only lending reduces the monthly cost by deferring capital repayment, but the total interest is always higher and the capital must still be repaid, either through a repayment phase or in full at the end of the term. The payment shock when transitioning from IO to repayment is the figure that catches most borrowers off guard, and seeing it calculated explicitly before committing to a structure is the single most useful output of this tool.
Part-and-part structures are a legitimate option in the right circumstances, and understanding the exact cost of the IO element, in both monthly and total terms, is the starting point for deciding whether that flexibility is worth the price. Full interest-only carries the additional capital risk that the balance is never reduced, which requires a credible repayment strategy assessed by the lender before approval.
Explore all loan guides and tools
Everything in one place, across secured loans, debt consolidation, and home improvementsUpdate log: July 2026
What changed in this update
The tool now includes a retained interest toggle for modelling bridging loan scenarios where interest is added to the balance rather than paid monthly. This produces a higher and more accurate cost figure for retained interest structures because the calculation accounts for monthly compounding. The balance trajectory chart reflects the growing balance during a retained interest phase.
The invest-the-saving panel now shows the breakeven return rate — the minimum annual investment return needed for the monthly IO saving to offset the extra interest cost. The LTV panel now includes a property appreciation slider so borrowers can test the common assumption that rising property values will improve the equity position during an IO phase.
The cost bars now show the full financial obligation on full interest-only structures, including the capital due at the end of the term. Accessibility improvements include screen reader support for all sliders and output panels, WCAG AA contrast compliance on secondary text, directional indicators on comparison outputs, and a text alternative for the balance trajectory chart. Cross-links to HELOC and bridging guides have been added where those product types are discussed.
This tool is for illustrative purposes only and does not constitute financial advice. Interest-only calculations assume no capital is repaid during the interest-only period. Retained interest calculations assume interest compounds monthly on the outstanding balance. Part-and-part calculations assume the full balance (including any accrued retained interest) is repaid over the remaining repayment period. The rate offered on an interest-only or part-and-part product may differ from a full repayment product at the same LTV and credit profile. Interest-only products require a credible repayment strategy assessed by the lender. Property appreciation assumptions are illustrative only and not guaranteed. Your home may be at risk if you do not keep up repayments on a secured loan. Actual outcomes will depend on your individual circumstances.
