Mortgage Calculator
A mortgage is usually the largest loan anyone takes and the one where small differences in rate compound into very large amounts of money.
How a repayment mortgage works
A repayment (capital and interest) mortgage uses the same amortisation formula as any other loan:
Over 25 years at 4.5 %, a £255,000 loan costs £1,417 a month and £170,000 in interest — you repay about 1.67 times what you borrowed. The length of the term is what makes mortgage interest so large relative to the rate.
An interest-only mortgage pays only the interest each month, leaving the full capital outstanding at the end. The monthly cost is lower and the total cost is higher, and you need a credible plan to repay the capital. Most residential lenders now restrict these heavily.
Why loan-to-value matters so much
LTV is the loan as a percentage of the property value, and lenders price in bands. The differences are not small:
| Deposit | LTV | Typical pricing |
|---|---|---|
| 5 % | 95 % | Highest rates, fewest products |
| 10 % | 90 % | Noticeably better |
| 15 % | 85 % | Competitive |
| 25 % | 75 % | Near the best rates |
| 40 % | 60 % | Best available |
Crossing a band boundary is frequently worth more than any amount of negotiation. Finding an extra £3,000 to move from 90.5 % to 89.9 % LTV can cut the rate by a quarter of a point, which on £255,000 over 25 years is worth roughly £10,000.
The case for overpaying
Overpayments attack the principal directly, and because interest is charged on the outstanding balance, every pound removed stops generating interest for the remainder of the term. On the example above, £200 a month extra clears the mortgage roughly four years early and saves around £35,000 in interest.
Before overpaying, check three things: whether your deal allows it without penalty (typically 10 % of the balance per year during a fixed period), whether you have higher-rate debt that should be cleared first, and whether you have an emergency fund — money put into a mortgage is very hard to get back out.
What this calculator does not include
The monthly repayment is not the monthly cost of owning a home. Budget separately for:
- Purchase costs: stamp duty or transfer tax, legal fees, survey, lender arrangement fee, broker fee. Frequently 3–5 % of the price.
- Ongoing costs: buildings insurance (usually compulsory), service charges and ground rent on leasehold property, council or property tax.
- Maintenance: a common planning figure is 1 % of the property value per year averaged over time.
- Rate risk: if your fixed period ends, you revert to a variable rate. The calculator shows what a one-point rise would cost — stress-test your budget against it.
Frequently asked questions
Should I take a longer term and overpay?
It is a reasonable strategy where overpayments are allowed without penalty. A longer term lowers the contractual payment, giving you a safety margin if income falls, while overpayments let you clear it as fast as a shorter term would. You pay slightly more if you ever stop overpaying, which is the price of the flexibility.
Fixed or variable rate?
A fix buys certainty at a small premium; a variable rate may cost less but exposes you to rises. The honest test is whether a two-point rise would break your budget. If it would, fix. If you have substantial headroom, a tracker can work out cheaper.
How much can I borrow?
Most lenders cap at 4 to 4.5 times income, then apply an affordability assessment based on your actual outgoings and a stress-test rate well above the one you are offered. Deposit size, credit history and loan term all move the figure. Only a decision in principle from a lender gives you a real answer.