That's not what you said here:
You don't pay capital on interest only.
They had too once the loan is called in. If you borrow 300k to buy a home and pay interest only, the capital element STILL has to be repaid at some rate - so for example a 25 year mortgage with a 25 year interest only term will have 300k capital to repay at the end, or if there is a 15 year interest only term followed by a 10 year interest and capital period, its 1125 a month at a rate of around 4% for 15 years followed by 3109 a month for the last 10 years.
Worked examples: 300k with 10 year fixed term interest only (from comparethemarket.com) - albeit at UK high BTL rates, but you can see that the cost is far higher
Representative example
Borrowing £300,000 over 25 years, representative APRC 7.6%:
Initial term
122 payments of £1,395.00 at 5.58% (fixed)
End rate
178 payments of £2,235.00 at 8.94% (variable)
Total interest
£567,520.00
Total upfront fees
£1,295.00
Total amount payable
£868,815.00
And for same amount, full repayments:
Borrowing £300,000 over 25 years, representative APRC 7.0%:
Initial term
122 payments of £1,856.62 at 5.58% (fixed)
End rate
178 payments of £2,280.53 at 8.94% (variable)
Total interest
£331,941.60
Total upfront fees
£1,295.00
Total amount payable
£633,236.60
It costs more because the repayments for the interest only period don't pay anything off the capital, meaning the cumulative interest ends up being much higher. That's why interest only has been so devastating for BTL buyers from the early 00s in this country, where people bought in the expectation of short term capital appreciation, assuming that would both clear off the loan liability AND leave them with sufficient profit to clear any other costs.