Mortgage Repayment Calculator

How Mortgage Repayments Are Calculated

Monthly repayments on a capital repayment mortgage are calculated using a standard amortisation formula. Each monthly payment covers a portion of the interest due that month plus a portion of the outstanding capital. Early in the term, most of your payment goes towards interest; over time, the balance shifts towards paying off capital.

With an interest-only mortgage you pay only the interest each month and repay the full loan amount at the end of the term. Monthly costs are lower, but you need a separate plan to repay the capital.

What Affects Your Mortgage Rate?

Several factors influence the interest rate a lender will offer you:

• Loan-to-value (LTV): A larger deposit generally means a lower rate. Key thresholds are 90%, 80%, 75% and 60% LTV.
• Credit score: A strong credit history gives you access to the best deals.
• Fixed vs variable: Fixed rates offer certainty; tracker and variable rates may start lower but can change.
• Term length: Shorter terms sometimes attract marginally lower rates.
• Bank of England base rate: This influences the cost of borrowing across the market.

How Does Term Length Affect Your Mortgage?

A longer mortgage term reduces your monthly payments but increases the total interest you pay over the life of the loan. For example, a £200,000 mortgage at 4.5% costs around £1,111 per month over 25 years (total interest ~£133,000), but only £1,013 per month over 30 years (total interest ~£165,000). That is £98 less per month but £32,000 more in total interest.

Most UK mortgages run for 25 years, but terms of 30, 35 or even 40 years are increasingly common, especially for first-time buyers stretching to get on the ladder.