If you’ve been in the property game for a while, you’ve probably come across interest-only mortgages. For UK landlords, they’ve long been a popular choice - mainly because they keep monthly repayments low and free up cash. But with recent changes to tax rules and tighter lending criteria, they’re not quite the easy win they used to be.

So, should you still consider an interest-only mortgage as part of your investment strategy? Let’s break down the pros and cons.

First off – what is an interest-only mortgage?

It’s pretty simple: with an interest-only mortgage, you’re only paying off the interest each month - not the actual loan. That means lower monthly payments, but you’ll need a clear plan to pay back the full amount when the mortgage term ends.

Why some landlords still love them:

Cheaper monthly costs

Because you’re not paying back the loan itself, your monthly payments are much lower compared to a repayment mortgage. That gives you a bit more breathing room, especially if you’re just starting out or looking to grow your portfolio.

Better cash flow

With less going out each month, you’ve got more money to reinvest — whether that’s on renovations, buying another property, or just keeping a rainy-day fund.

Bigger gains if the property goes up in value

If house prices rise over time, you could walk away with a decent chunk of profit — even though you haven’t paid down the loan. Great if the market’s on your side.

Some tax advantages (if you’re structured right)

The mortgage interest tax relief for individual landlords has been phased out — but if you own property through a limited company, you can still claim the full interest as a business expense. Worth chatting to a tax advisor about.

But there are some serious downsides:

You’ll still owe the full loan at the end

This one’s big: after 20 or 25 years, you’ll need to pay back the full amount you borrowed. If you haven’t got a plan (like selling the property or refinancing), you could be in trouble.

More expensive overall

Since you’re not paying off the loan, you’ll pay interest on the full amount for longer — which can end up costing more in the long run.

You’re relying on the market

If house prices drop, you might not be able to sell for enough to cover the mortgage. Negative equity is a real risk if things go south.

Fewer lenders, stricter rules

Not all lenders offer interest-only anymore, and those that do usually want a bigger deposit, a solid repayment plan, and sometimes a higher income. It’s not as easy to qualify as it used to be.

So…

Interest-only mortgages can still work for you, especially if you’ve got a clear plan and you’re using the cash flow wisely. But they’re not a “set and forget” option. You’ll need to keep an eye on the market, have a realistic exit strategy, and maybe get some advice from a broker or tax pro.

If you’re in it for the long haul and know what you’re doing, they can be a smart part of your toolkit. Just make sure you’re going in with your eyes open.

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