The mortgage payment calculator helps estimate monthly payments when purchasing a home in the UK. See how much your monthly mortgage repayment will be to see how much you can afford based on various interest rates. Since a mortgage is one of the largest purchases you will have, it is important to understand how it will impact your finances.
How this mortgage payment calculator works
This mortgage payment calculator helps calculate monthly payments on a new mortgage as well as interest-only or repayment mortgages. You will need to enter inputs such as the purchase price of the home, down payment, mortgage interest rate as well as amortization period.
You can then switch between different values for the inputs to see how it impacts your monthly mortgage payment.
Key Factors That Affect Your Mortgage Payments
Several factors influence how much you pay each month for your mortgage. Understanding these can help you make better decisions and compare deals:
- Interest rate: Higher rates mean higher monthly payments. Fixed rates offer certainty, while variable rates can change over time.
- Loan term: Spreading your mortgage over a longer period (e.g., 30 years vs 20 years) reduces monthly payments but increases total interest paid.
- Deposit size: A larger deposit means you borrow less and may access better rates.
- Property price: The more expensive the property, the larger the loan required.
- Type of mortgage: Repayment mortgages pay off both interest and principal; interest-only mortgages only pay the interest, with the principal due at the end.
Example: Calculating Your Monthly Mortgage Payment
Suppose you want to buy a home for £300,000 with a £50,000 deposit. You need a £250,000 mortgage at a 5% interest rate over 25 years (repayment mortgage).
The monthly payment formula is:
M = P[r(1+r)^n] / [(1+r)^n – 1]
Where:
- M = monthly payment
- P = principal (amount borrowed)
- r = monthly interest rate (annual rate ÷ 12)
- n = total number of payments (years × 12)
Plugging in the numbers:
- P = £250,000
- r = 0.05 ÷ 12 = 0.004167
- n = 25 × 12 = 300
Monthly payment ≈ £1,461
How Do Payments Change With Different Rates and Terms?
The interest rate and loan term you choose have a major impact on both your monthly payments and the total amount you’ll repay over the life of your mortgage. Lower rates and shorter terms mean higher monthly payments but much less interest overall, while longer terms or higher rates make monthly payments more affordable but increase the total cost of borrowing.
Monthly Payment Comparison Table
Below are example monthly payments for different loan amounts, interest rates, and terms. This helps you see how changing just one factor can affect your budget:
| Loan Amount | Term | 3% | 4% | 5% | 6% |
|---|---|---|---|---|---|
| £150,000 | 20 yrs | £832 | £909 | £989 | £1,073 |
| £150,000 | 25 yrs | £711 | £791 | £877 | £966 |
| £150,000 | 30 yrs | £632 | £716 | £805 | £897 |
| £200,000 | 20 yrs | £1,109 | £1,212 | £1,319 | £1,430 |
| £200,000 | 25 yrs | £948 | £1,055 | £1,169 | £1,288 |
| £200,000 | 30 yrs | £843 | £955 | £1,073 | £1,196 |
| £300,000 | 20 yrs | £1,664 | £1,818 | £1,978 | £2,145 |
| £300,000 | 25 yrs | £1,422 | £1,583 | £1,754 | £1,932 |
| £300,000 | 30 yrs | £1,264 | £1,433 | £1,608 | £1,795 |
All figures are approximate and for illustrative purposes only.
Example: Total Interest Paid
Suppose you borrow £200,000 at 5% interest:
- 20 years: Monthly payment £1,319. Total repaid: £1,319 × 240 = £316,560. Total interest: £116,560.
- 25 years: Monthly payment £1,169. Total repaid: £1,169 × 300 = £350,700. Total interest: £150,700.
- 30 years: Monthly payment £1,073. Total repaid: £1,073 × 360 = £386,280. Total interest: £186,280.
As you can see, extending the term lowers your monthly payment but significantly increases the total interest paid.
Key Takeaways
- Even a small change in interest rate can make a big difference to your monthly payment and total cost.
- Shorter terms mean higher payments but much less interest overall.
- Always compare both the monthly payment and the total amount repaid when choosing your mortgage.
How Overpayments Can Save You Money
Making extra payments (overpayments) on your mortgage can reduce the total interest you pay and help you pay off your loan sooner. Most lenders allow some overpayments each year (often up to 10% of the balance) without penalty. Check your lender’s terms for early repayment charges.
Example: Overpaying £100/month on a £200,000 mortgage at 5% over 25 years could save you over £18,000 in interest and pay off your mortgage 3 years early.
Stamp Duty and Your Mortgage
While Stamp Duty Land Tax (SDLT) is a separate upfront cost, it’s important to budget for it alongside your mortgage. The calculator can help you see how much you’ll need for your deposit, fees, and Stamp Duty, so you’re not caught out by extra costs.
Frequently Asked Questions
What’s the difference between fixed and variable rates? Fixed rates stay the same for a set period, giving certainty. Variable rates can go up or down, so your payments may change.
Can I get a mortgage with a small deposit? Some lenders offer mortgages with as little as 5% deposit, but rates are usually higher.
What are early repayment charges? Many mortgages have penalties if you pay off your loan early or overpay above a certain limit. Always check the terms.
Does the calculator include insurance or fees? No, it estimates mortgage payments only. Remember to budget for insurance, legal fees, and other costs.
How accurate is this calculator? It provides a good estimate, but your actual offer will depend on your lender’s criteria and your personal circumstances.