Interest-only mortgage | Crefin & Partners

Want to buy a home with the lowest possible monthly payments? Then an interest-only mortgage could be an attractive option! At Crefin & Partners, we help you understand how this type of mortgage works and whether it suits your personal situation. Below, you’ll find everything you need to know about the interest-only mortgage: what it is, how it works, the advantages and disadvantages, and more. Feel free to schedule a free, no-obligation consultation to explore your options!

What is an Interest-Only Mortgage?

With an interest-only mortgage, you only pay interest on the loan during the mortgage term. You are not required to make repayments on the principal, which means your monthly payments are significantly lower compared to other mortgage types. Your debt remains unchanged, and at the end of the mortgage term (usually 30 years), you must repay the full loan amount in one lump sum.This can be done, for example, by selling your home, using savings, or relying on pension assets. Since 2013, mortgage interest tax relief for new interest-only mortgages has only been available if you combine the mortgage with a repayment-based mortgage type, such as an annuity mortgage or a linear mortgage.At Crefin & Partners, we compare offers from more than 35 banks to determine the best solution for your situation. We explain everything clearly, so you know exactly what to expect.

How Does an Interest-Only Mortgage Work?

With an interest-only mortgage, you pay only the interest each month. For example, if you borrow €150,000 at an interest rate of 3%, your monthly payment would be approximately €375 in interest (€150,000 × 3% ÷ 12). You do not repay any of the principal, so the outstanding debt remains €150,000 throughout the entire mortgage term.At the end of the term, the borrowed amount must be repaid. This can be done through the sale of your home, with accumulated savings, or by extending the mortgage (if the bank allows it).Many people choose a combination mortgage, for example 50% interest-only and 50% annuity mortgage. This allows you to combine lower monthly payments with mandatory repayments while retaining eligibility for mortgage interest tax relief. Our mortgage advisors are happy to calculate how such a combination would work in your personal situation free of charge.

Advantages of an Interest-Only Mortgage

This mortgage type offers several attractive advantages:

Low monthly payments: because you do not repay the principal, you have more room in your monthly budget.
Flexibility: you can often make additional repayments whenever you choose, usually up to a certain percentage without penalties.
Beneficial with home equity growth: if your property increases in value, you may repay the debt later through the proceeds from selling the home.
Combination possibilities: combine it with an annuity or linear mortgage to retain mortgage interest tax relief.

Our mortgage advisors at Crefin & Partners help you make the most of these advantages in your specific situation.

Disadvantages of an Interest-Only Mortgage

There are also risks and disadvantages to consider:

No automatic repayment: your debt remains unchanged, which creates risk if property prices decline.
Limited mortgage interest tax relief: for new mortgages, the interest is only tax-deductible if combined with a repayment-based mortgage.
Future repayment obligation: you need a solid plan to repay the full debt at the end of the mortgage term.
Stricter acceptance criteria: banks are generally more cautious about granting fully interest-only mortgages.

Unsure about the risks? We provide honest advice about the pros and cons and explore suitable alternatives with you.

Who Is an Interest-Only Mortgage Suitable For?

This mortgage type may suit you well if you want low monthly payments and have a clear strategy for repaying the debt later. It is often attractive for:

Home movers with substantial home equity who plan to repay the mortgage through the future sale of their property.
Seniors who gain additional borrowing capacity with a partially interest-only mortgage.
People with sufficient savings or pension assets who intend to repay the debt later.

Our mortgage advisors review your income, assets, and future plans to determine whether this mortgage type is suitable for you.

Costs and Mortgage Interest Tax Relief

Your monthly payments mainly consist of interest. In addition, there are one-time costs such as mortgage advice and notary fees. For new mortgages, the interest is only tax-deductible if you choose a combination mortgage with a repayment-based component. At Crefin & Partners, we charge a fixed fee for our mortgage advice, which may also be tax-deductible. Please visit our rates page for more details.

Why Choose Crefin & Partners?

At Crefin & Partners, we make everything related to mortgages clear and personal. As your mortgage advisor, we offer:

Personal guidance tailored to your situation and future plans
Extensive comparisons from more than 35 banks to find the best conditions
A free initial consultation
Transparent, fixed advisory fees with no surprises

Frequently Asked Questions About the Interest-Only Mortgage

Can I Make Additional Repayments During the Mortgage Term?

Yes, in many cases you can repay an additional percentage each year (for example, 10%) without penalties. We will check the exact conditions for you.

What if My Home Decreases in Value?

In that case, you may face the risk of negative equity. We advise you about this risk and possible solutions.

Can I Combine This Mortgage With Other Mortgage Types?

Absolutely. A combination with an annuity or linear mortgage is very popular to retain mortgage interest tax relief. We are happy to calculate the best combination for your situation.

Get in Touch!

Interested in a fully or partially interest-only mortgage for your home? Schedule a free, no-obligation appointment with Crefin & Partners. Our mortgage advisors will help you find the best solution for your needs. Feel free to contact us and request your free consultation today.