How mortgage payments are calculated
You borrow the property price minus your deposit. On a repayment mortgage, each monthly payment covers that month's interest and pays off some of the loan, so the balance falls to zero by the end of the term. Early payments are mostly interest; later payments are mostly capital.
On an interest-only mortgage, you pay just the interest each month and still owe the full loan at the end of the term. You'll need a plan to repay it, such as savings, investments or selling the property, and lenders will ask how you intend to do that.
Worked example
A £300,000 home with a £50,000 deposit means borrowing £250,000. At 4.5% over 25 years on a repayment basis, the monthly payment is £1,389.58. Over the full term you'd pay £166,874.36 in interest, £416,874.36 in total.
The same mortgage on an interest-only basis costs £937.50 a month, but after 25 years you'd still owe the £250,000.
What affects your payment
A bigger deposit means borrowing less, and it often gets you a lower interest rate too. A longer term lowers the monthly payment but increases the total interest you pay.
Most mortgage deals have a fixed or discounted rate for a few years, after which the rate usually changes. This calculator assumes one rate for the whole term, so use it to compare options rather than as an exact quote.
Inputs for the mortgage calculator
Property price
The price of the home you're buying.
Deposit
The amount you're putting down yourself. You'll borrow the property price minus your deposit.
Interest rate (per year)
The annual interest rate on your mortgage. The rate shown is only an example, so enter the rate from your quote. Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Term
How many years you'll take to repay the mortgage.
Repayment type
Repayment pays off the loan over the term. Interest only covers just the interest, so the full loan is still owed at the end.
CALCULATOR QUESTIONS
Mortgage calculator questions
How much will my mortgage cost each month?
Enter the property price, your deposit, the interest rate and the term above. As an example, borrowing £250,000 at 4.5% over 25 years costs £1,389.58 a month on a repayment basis.
Is a longer mortgage term better?
A longer term lowers your monthly payment but means paying interest for longer, so the total cost is higher. A shorter term costs more each month but less overall.
What's the difference between repayment and interest-only?
A repayment mortgage clears the loan by the end of the term. With interest-only, monthly payments are lower but you still owe the full amount at the end and need a separate way to repay it.
Does this include fees, insurance or stamp duty?
No. It covers the loan repayments only. Arrangement fees, valuation and legal fees, insurance and stamp duty are extra costs to budget for.