When compound interest builds up on a home loan
On a normal repayment mortgage, each monthly payment covers that month's interest and pays off some of the loan, so interest is charged on a falling balance. If you're making your payments, the mortgage interest calculator or mortgage calculator will show your real cost.
If payments stop, for example during a payment holiday or while you're in arrears, interest is usually still charged and added to the balance. The next month's interest is then charged on that bigger balance, so the debt grows. This calculator shows that growth, assuming nothing is repaid during the time period.
Worked example
On a £150,000 mortgage at 4.5% a year, compounded monthly, with no payments for 5 years, the balance would grow to £187,769.37. That's £37,769.37 of interest, and a balance 1.25 times the amount borrowed.
Even one year without payments would take the balance to £156,890.97, and your remaining payments would usually rise to clear the extra.
If you're struggling with mortgage payments
Contact your lender as early as you can. They may be able to offer options such as a temporary change to your payments or a longer term. Missing payments can lead to arrears charges, harm your credit record and, ultimately, repossession of your home.
Free, confidential debt advice is available if you're worried about keeping up with your mortgage.
Inputs for the compound interest calculator home loan
Amount borrowed
The mortgage balance at the start of the period, such as your current outstanding balance.
Annual interest rate
The yearly interest rate on your mortgage. The rate shown is only an example, so enter your own rate.
Time period
How many whole years the balance builds up with no payments.
Interest compounds
How often interest is added to the balance: daily, monthly, quarterly or annually. Your mortgage offer explains how interest is charged.
CALCULATOR QUESTIONS
Home loan compound interest calculator questions
Do mortgages use compound interest?
On a repayment mortgage, interest is charged on the balance, which falls as you pay. Unpaid interest only compounds into a bigger balance if payments stop or are paused.
How much would a £150,000 mortgage grow with no payments?
At 4.5% compounded monthly, it would grow to £156,890.97 after one year and £187,769.37 after 5 years.
Does a mortgage payment holiday cost more?
Usually, yes. Interest is normally added while payments are paused, so you'll owe more afterwards and pay more interest overall.
Does this include arrears fees?
No. It shows interest only. Lenders may also charge fees if you fall behind with payments.