Why most landlords choose interest only
On an interest-only buy-to-let mortgage you pay only the interest each month, and the loan itself is repaid at the end of the term. That keeps monthly payments far lower than on a repayment mortgage, as the calculator shows, which improves cashflow and makes the lender's rent test easier to pass.
How you repay the loan
Lenders want a credible repayment strategy, and for buy-to-let that's usually selling the property. Some landlords sell one property to clear the debt on others, or switch part of the loan to repayment later. Interest-only only works long term if the property is still worth more than the loan when the term ends.
Interest only vs repayment
- Interest only: the lowest monthly cost and the most cashflow, but the debt doesn't go down. You're relying on the property's value.
- Repayment: the debt is cleared by the end of the term, but you pay a lot more each month, which can squeeze cashflow and fail the rent test.
- Part and part: some lenders allow a split, with part of the loan on repayment and part on interest only.
Tax
How mortgage interest is taxed depends on whether you own personally (a 20% tax credit under Section 24) or through a limited company (a full deduction). Speak to your accountant.
See what the rent supports in the buy-to-let mortgage calculator, and how much you'll need to put down in our deposit guide.
Frequently asked questions
Are most buy-to-let mortgages interest only?
Yes. Most landlords choose interest only to keep payments low and cashflow strong, planning to repay the loan from a sale.
Do I need a repayment plan for an interest-only buy-to-let?
Lenders expect one. For buy-to-let, selling the property is normally accepted, but you'll need to be sure the property will be worth more than the loan.
Can I switch from interest only to repayment later?
Usually yes, at a product change or remortgage, subject to affordability and the rent test.
Is interest only cheaper than repayment?
Monthly, yes, by a lot. Over the whole term you pay more interest, because the loan balance never falls.