Mortgage Calculator

The standard repayment formula is M = P × [r(1+r)^n] / [(1+r)^n - 1], where M is the monthly payment, P is the loan amount, r is the monthly interest rate (annual rate divided by 12) and n is the term in months. On a £200,000 loan at 4.5% over 25 years, that works out to £1,112 a month.

The maths is brutal in the early years. On that same £200,000 loan, your first monthly payment puts £750 toward interest and only £362 toward the actual loan balance. By year 15 the split flips and most of each payment is finally chipping away at the principal. Total interest paid across the 25 years comes to roughly £133,560. That is why overpaying even £100 a month early in the term can knock years off the mortgage and save tens of thousands.

Repayment mortgages reduce the loan each month, so you own the property outright at the end of the term. Interest only mortgages keep the loan balance flat and you owe the full original amount when the term ends.

Interest only is cheaper monthly. The same £200,000 loan at 4.5% costs £750 a month interest only, versus £1,112 a month on repayment. The catch is that you need a credible plan to clear the £200,000 at the end, usually selling the property, an investment portfolio or an inheritance. UK lenders have been strict about interest only since the 2014 Mortgage Market Review and most will not approve it for owner-occupiers without proof of a repayment vehicle. Most people buying a home should be on a repayment mortgage. Interest only is mainly used by buy-to-let landlords.

UK lenders typically cap mortgage offers at 4.5 times your annual income, sometimes stretching to 5 or 5.5 times for higher earners and specialist schemes. On a household income of £60,000, that is a maximum loan of £270,000 to £330,000.

The income multiple is only the start. Lenders run your full outgoings (childcare, car finance, credit card minimums, student loan repayments) and then stress-test your payments at a higher rate to make sure you could still cope if rates rose. A £20,000 deposit on a £250,000 house leaves a 92% loan-to-value mortgage, which costs noticeably more than an 80% LTV mortgage because the lender sees more risk. Once you know what you can borrow, use the [stamp duty calculator](/stamp-duty-calculator) to add the upfront tax bill to your budget, and the [savings burndown](/savings-burndown) tool to plan how long your deposit savings will last.

A small change in the headline rate has a disproportionate effect on the total cost. Going from 4.5% to 5.0% on a £200,000, 25-year mortgage adds £61 to the monthly payment but adds £18,300 to the total interest paid over the life of the loan.

This is why fixed rate deals matter. Most UK borrowers fix for 2 or 5 years; when the deal ends, you re-mortgage onto a new rate or roll onto the lender's standard variable rate, which is currently 6 to 8%. The risk is that if rates have risen by the time you re-mortgage, your monthly payment jumps. The 2022 to 2023 rate cycle caught a lot of borrowers off guard: a 1.5% fix from 2020 that ended in 2023 often saw payments roughly double. The sensible move is to stress-test your own budget at 2 percentage points above your current rate before you commit.