15 Year Interest Only Mortgage Calculator

An interest-only mortgage allows you to borrow money with the promise to pay only the interest for a set period, typically 5-15 years. After that term, you must start paying both principal and interest. This calculator helps you estimate your monthly interest payments for a 15-year interest-only mortgage.

How Interest-Only Mortgages Work

An interest-only mortgage is a type of home loan where you only pay the interest on the loan for an agreed period, typically 5-15 years. At the end of this period, you must start paying both principal and interest, which is called "capital repayment."

Key Features

Lower monthly payments during the interest-only period
Potential to save on interest payments
Risk of higher payments when you switch to capital repayment
Typically requires a larger deposit than repayment mortgages

Interest-only mortgages are popular among investors who plan to sell the property before the end of the interest-only period. They can also be suitable for those who expect their income to increase significantly after the interest-only period ends.

How the Calculation Works

The monthly interest payment for an interest-only mortgage is calculated using the following formula:

Interest-Only Mortgage Formula

Monthly Interest Payment = (Loan Amount × Annual Interest Rate) / 12

Where:

Loan Amount - The total amount borrowed
Annual Interest Rate - The interest rate for the mortgage (expressed as a decimal)

The calculator uses this formula to determine your monthly interest payments. It does not calculate the total amount you will pay over the life of the mortgage, as this would include both interest and principal payments after the interest-only period ends.

Worked Example

Let's say you take out a £200,000 interest-only mortgage at 4.5% annual interest for 15 years.

Example Calculation

Monthly Interest Payment = (£200,000 × 0.045) / 12

= £9,000 / 12

= £750 per month

After 15 years, you would need to start paying both principal and interest, which would likely result in higher monthly payments.

Frequently Asked Questions

What is the difference between an interest-only mortgage and a repayment mortgage?: An interest-only mortgage requires you to pay only interest for a set period, while a repayment mortgage requires you to pay both principal and interest from the start. Interest-only mortgages typically have lower monthly payments during the interest-only period but higher payments when you switch to capital repayment.
Can I get an interest-only mortgage with a smaller deposit?: No, interest-only mortgages typically require a larger deposit than repayment mortgages because they carry more risk for lenders. You usually need at least 25-40% deposit depending on your circumstances.
What happens at the end of the interest-only period?: At the end of the interest-only period, you must start paying both principal and interest, which is called "capital repayment." This will result in higher monthly payments. You may need to remortgage or refinance to switch to a repayment mortgage.
Are interest-only mortgages suitable for first-time buyers?: Interest-only mortgages are generally not suitable for first-time buyers because they require a larger deposit and carry more risk. Repayment mortgages are more common for first-time buyers.
Can I extend the interest-only period?: In some cases, you may be able to extend the interest-only period by remortgaging, but this will depend on your lender's policies and your financial situation. It's important to carefully consider the implications before extending the interest-only period.