Interest-Only Remortgage — What Lenders Accept in 2026

The Current State of Interest-Only Mortgages

Interest-only mortgages are still available in 2026 but are subject to significantly tighter criteria than before the 2008 financial crisis. At their peak, interest-only mortgages were offered widely with inadequate verification of how borrowers planned to repay the capital at the end of the term. Regulatory changes introduced from 2012 onwards fundamentally tightened this, and the current market reflects those changes.

For remortgaging purposes, this matters in two ways: existing interest-only borrowers may face challenges finding a new deal, and new borrowers seeking interest-only products must meet demanding criteria.

Use our [remortgage savings calculator](/remortgage-calculator) to model how switching from interest-only to repayment — or remortgaging on interest-only terms — would change your monthly payment.

How Interest-Only Mortgages Work

With an interest-only mortgage, your monthly payment covers only the interest on the loan. The capital balance does not reduce. At the end of the term, you owe exactly what you borrowed at the start and must repay it in full — typically by selling the property, using a pension lump sum, maturing investments, or another capital source (the "repayment vehicle").

**The payment difference is significant:**

On a £250,000 mortgage at 4.5% over 25 years:

• **Repayment mortgage:** monthly payment ~£1,389
• **Interest-only mortgage:** monthly payment ~£938 (just the interest)
• **Difference: £451/month lower**

The lower payment explains the appeal — but the £250,000 capital debt does not disappear and must be settled at term end.

What Lenders Require for Interest-Only in 2026

Almost all lenders now require a credible, documented repayment vehicle. Acceptable vehicles fall into the following categories:

1. Sale of the Mortgaged Property

The most widely accepted repayment vehicle. The borrower will sell the property at the end of the term and use the proceeds to repay the mortgage. Lenders typically require:

• A minimum property value that leaves adequate equity margin above the loan at the end of the term
• A maximum LTV (often 50–75% for interest-only) — the lower LTV requirement reflects the lender's need for a buffer against property price declines over the term
• Formal acknowledgement in the mortgage deed that the repayment source is property sale

This route is most commonly used by older borrowers with substantial equity, or by buy-to-let investors.

2. Stocks and Shares ISA or Investment Portfolio

A documented investment strategy (typically a stocks and shares ISA or a portfolio of unit trusts or similar) can serve as a repayment vehicle, subject to:

• The projected value at the end of the term being sufficient to repay the capital (lenders may apply a conservative growth rate assumption)
• Evidence of the investment account and regular contributions
• Some lenders require that the current value is already a significant proportion of the outstanding loan

3. Pension Lump Sum

For borrowers close to or at retirement age, a pension that will yield a tax-free lump sum (typically 25% of the pension pot) can serve as a repayment vehicle. Lenders require:

• Evidence of the pension (most recent statement showing projected values)
• The mortgage term must align with the expected retirement date
• The projected lump sum must be sufficient to repay the outstanding balance

Defined contribution pensions are the most commonly used. Defined benefit pensions can sometimes be used but require more careful documentation.

4. Endowment Policy

Many older interest-only mortgages were taken out with an associated endowment policy. Where an endowment remains in force and its projected maturity value is sufficient to cover the loan, it remains an acceptable repayment vehicle for remortgage purposes.

Most endowment policies that matured before 2020 have already been used to repay mortgages. Remaining endowments are typically near maturity and may have modest projected values — lenders will assess whether any shortfall is covered.

5. Sale of Other Assets (Rare)

Some lenders accept the sale of other properties, business interests, or substantial investment assets as repayment vehicles. This is less common and typically requires specialist or private banking lenders.

Minimum Equity and LTV Requirements

Interest-only products typically require significantly more equity than repayment mortgages. Mainstream lenders commonly require:

• **Minimum property value:** £300,000–£500,000 (some lenders have minimum property value criteria)
• **Maximum LTV:** 50–75% (compared with 90–95% for repayment mortgages)

A borrower on interest-only at 75% LTV has only a 25% equity cushion. If property prices fall 20%, their equity is effectively halved and the repayment vehicle (property sale) may not fully cover the loan. This is why low LTV is a fundamental requirement.

Existing Interest-Only Borrowers at Remortgage

Many homeowners took out interest-only mortgages in the 2000s and early 2010s. At remortgage, they face additional scrutiny:

**If you have a clear, documented repayment vehicle:** Mainstream and specialist lenders will consider your application, subject to the LTV and criteria above.

**If your repayment vehicle has a projected shortfall:** You will need to either:

• Overpay the shortfall over the remaining term
• Switch to a repayment mortgage (or part-and-part — see below)
• Extend the term if age and income permit
• Accept that the property will need to be sold at term end

**If you have no repayment vehicle:** Many lenders will not offer a new interest-only product. The FCA has identified a significant cohort of homeowners in this position and has encouraged lenders to work with them constructively rather than forcing immediate full repayment.

Part-and-Part Mortgages

A part-and-part (or part-interest-only, part-repayment) mortgage splits your borrowing:

• One portion on a repayment basis
• One portion on interest-only

This reduces monthly payments versus full repayment while ensuring at least part of the capital is being paid down. It also reduces the eventual repayment vehicle requirement because only the interest-only portion needs to be cleared from an alternative source.

This is often a practical compromise for borrowers who need to reduce their monthly obligation but cannot meet the criteria for a full interest-only product, or who want to maintain some capital reduction while keeping payments manageable.

Age Considerations

Many lenders apply an upper age limit of 70 or 75 at the end of the mortgage term. For interest-only mortgages tied to retirement income or property sale, the alignment of the term end with retirement plans is critical.

Older borrowers with specific needs (borrowing into retirement, equity release objectives) may be better served by retirement interest-only (RIO) mortgages — a specific product category with different rules — or equity release lifetime mortgages. A specialist broker can advise on which product category is most appropriate.

Use our [remortgage savings calculator](/remortgage-calculator) to model the monthly payment difference between interest-only and repayment terms, and to understand the total cost differential over your proposed new mortgage period.