Loan Interest Calculator
Repayment or interest-only — mortgages, personal loans, and more
| Year | Annual Payment | Interest Paid | Balance Remaining |
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Repayment vs interest-only mortgages
With a repayment mortgage, each payment covers both interest and a portion of the capital. By the end of the term, your loan is fully paid off. This is the most common type in the UK and guarantees you own your home outright at the end.
With an interest-only mortgage, your monthly payments only cover the interest. The original loan amount remains unchanged and must be repaid in full at the end of the term — typically through savings, investments, or selling the property. Monthly payments are lower, but you need a credible repayment plan.
Repayment: ~£1,111/month · Total interest ~£133,000
Interest Only: ~£750/month · Total interest ~£225,000 + £200,000 lump sum at end
Repayment costs significantly less in total for most borrowers.
How to reduce the interest you pay on a loan
Overpay each month. Even small regular overpayments dramatically cut the total interest and shorten the term. Check your lender's overpayment allowance — most allow up to 10% per year without penalty.
Remortgage when your deal ends. Most mortgages move to the lender's Standard Variable Rate (SVR) after the initial deal period, which is typically much higher. Remortgaging to a new deal can save thousands.
Shorten the term if you can afford it. A 20-year term vs 25 years on the same rate and amount will save you years of interest, though monthly payments will be higher.