Part Repayment, Part Interest Only Mortgages

Can’t decide between an interest-only or repayment mortgage? There’s a third option offering a combination of the two. Read here to learn more about part-and-part mortgages.

Are you looking for a Part-and-Part mortgage?

Home Interest Only Mortgages Part Repayment, Part Interest Only Mortgages

Author: Pete Mugleston

Mortgage Advisor, MD

Reviewer: Jon Nixon

Director of Distribution

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

When it comes to mortgage repayment methods, people typically choose between the capital repayment and interest only model but there is a third option. Part interest part repayment mortgages are, effectively, a hybrid of both.

This comprehensive guide looks at what a part and part mortgage is, how they work, who qualifies and how to explore it as a viable alternative to the main standalone repayment methods.

What is a part-and-part mortgage?

This type of home loan combines both interest-only and capital repayment by allowing you to pay just a portion, rather than all, of your mortgage loan back through monthly repayments. That leaves a smaller balance to be settled up at the end of the term.

You can get a clearer idea of how these mortgages work and what your repayments could look like if you choose one by trying our calculator below.

Part and Part Mortgage Calculator

This calculator will work out what your mortgage payments will be on an agreement that’s part interest only and part capital repayment. Simply enter the full loan amount and the portion of the debt that will be interest only, along with the interest rate and term length, and our calculator will do the rest.


Enter the amount you're borrowing
£
Enter the total amount required on interest only
£
Must be less than the loan amount
Enter the mortgage rate, 5.5% is a typical rate currently but this can vary
%
Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
years

Monthly Repayments:

Monthly Interest Payments:

Monthly Total Payments:

Now that you have a rough idea of what your monthly repayments could look like, speak to a mortgage broker to find out how much they could help you save each month and overall.

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The benefits of these mortgages

Half interest and half repayment mortgages offer a unique and flexible repayment solution, bringing multiple benefits.

These include:

  • The ability to pay less in monthly repayments than in a capital repayment model;
  • A reduction in the lump sum that would be paid at the end of an interest-only mortgage;
  • Less interest to pay than on an interest-only mortgage as it reduces over time; and
  • The opportunity to have a say in the ratio between the two mortgage types.

The drawbacks, as with an interest-only mortgage, are that you do still need a feasible way of paying off that lump sum at the end of the mortgage and if your repayment vehicle doesn’t work out, you’d need to have another one in place to repay the outstanding debt.

An advisor would be able to work with you to ensure your plan is a solid one and that you have back up options available.

How to get a part-and-part mortgage

If you think this is a model you’d like to explore and potentially apply for, these steps will get you off to a good start:

Use a part repayment part interest only mortgage calculator.

This will help you to determine what ratio of repayment to interest-only works best for you. It’ll give you an idea of what your monthly repayment could look like. While this is something that would be finalised with a lender, it’s good to have an idea before applying.

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Who qualifies for this type of mortgage?

There are generally specific stipulations when it comes to a part and part mortgage, each lender will still work to their own criteria but what they will all be looking at is:

  • Your repayment plan: A lender will want to know how you plan to pay off the remaining balance for the interest-only element at the end of the term and see evidence of this plan.
  • The property type and value: Interest-only is viewed as a risker arrangement. If a property is non-standard then there’s an additional layer of risk that may affect a lender’s willingness to loan to you on a part and part basis. There are some specialist lenders however that could be accessed via a broker in this situation.
  • The deposit: A higher deposit reduces the risk for lenders. The maximum loan-to-value (LTV) most lenders will accept in a part and part situation is 85% so anything lower than that will work in your favour.

As with any mortgage application, the crux of the assessment lies in whether you can feasibly repay what you’re asking to borrow, so you’ll also need to submit information on your income and outgoings, any existing debt and credit.

Who offers part and part mortgages?

The fact they come with a slightly higher risk level than conventional mortgages does mean that the market for part and part mortgages is narrower – but it does exist. These type of home loans are available – subject to availability – with some high street lenders including:

  • Skipton Building Society
  • Halifax
  • Barclays
  • Leeds Building Society

What a quick Google search won’t pull up though are the number of specialist part and part mortgage lenders out there. Working via a broker, there is more of a chance to negotiate with such lenders and, as specialists, they sometimes offer better rates, viewing the situation as less risky than a mainstream lender might.

Regardless of which lender you feel is right for you, approaching directly puts you at risk of a rejection. Working through a broker will speed up the process of finding the best deal while allowing for an expert to take thorough stock of the rates, ratio and terms being offered to you.

Get matched with a part-and-part mortgage specialist

This hybrid model has a few more calculations involved and requires a watertight repayment plan. Working with a broker ensures you’re applying to the best lender for the best part and part mortgage for you. The brokers we work with have access to the entire lending market and will be able to do a part and part mortgage comparison, determining the best rates available at the time of application.

You can enjoy a free, no-obligation consultation by calling 0808 189 0463 or filling out an enquiry form.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.


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FAQs

Yes. To switch to interest-only, a lender will however need all all-important evidence to show you’ll be able to pay off this larger end amount. Switching to capital repayment also means showing a lender you can afford the monthly repayments.

Yes. If you plan to purchase a property for rental purposes, opting for this repayment model is an option. Speak to a broker about connecting with a specialist buy-to-let lender.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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