Mortgage Repayment Calculator
Calculate your monthly mortgage repayments with precision. Get accurate estimates for different loan amounts, interest rates, and terms to plan your home purchase budget effectively.
Understanding Mortgage Repayments
Monthly Payment Calculation
Your monthly mortgage payment is calculated using the loan amount, interest rate, and term. Understanding this calculation helps you budget effectively and compare different mortgage options.
Principal vs Interest
Each payment consists of principal (reducing your loan balance) and interest (cost of borrowing). Early payments are mostly interest, while later payments are mostly principal.
Amortization Schedule
An amortization schedule shows exactly how much of each payment goes to principal and interest over the life of your loan, helping you understand your mortgage journey.
Total Cost of Borrowing
Beyond monthly payments, consider the total interest paid over the loan term. Small changes in rate or term can significantly impact your total borrowing costs.
Types of Mortgage Repayments
Repayment Mortgage
How it works: You pay both capital and interest each month, gradually reducing the loan balance until it's fully paid off.
Advantages:
- Guaranteed to pay off the loan
- Build equity from day one
- Lower risk option
Considerations:
- Higher monthly payments
- Less flexibility
- Early payments mostly interest
Interest-Only Mortgage
How it works: You only pay the interest each month. The capital amount remains unchanged and must be repaid at the end of the term.
Advantages:
- Lower monthly payments
- More cash flow flexibility
- Potential for investment
Considerations:
- No equity building
- Need repayment strategy
- Higher total interest cost
Factors Affecting Your Mortgage Payments
Interest Rate
The most significant factor affecting your payments. Even a 0.5% difference can save or cost thousands over the loan term. Shop around for the best rates.
Loan Term
Longer terms mean lower monthly payments but more total interest. Shorter terms increase monthly payments but reduce total borrowing costs significantly.
Loan Amount
The amount you borrow directly affects your monthly payment. A larger deposit reduces the loan amount and can help you access better interest rates.
Loan-to-Value Ratio
Your LTV ratio affects the interest rate offered. Lower LTV ratios (larger deposits) typically qualify for better rates and terms.
Frequently Asked Questions
How is my monthly mortgage payment calculated?
Your monthly payment is calculated using the PMT formula, which considers your loan amount, interest rate, and loan term. The formula ensures that if you make the same payment each month, your loan will be fully paid off by the end of the term.
What's the difference between capital and interest?
Capital (or principal) is the amount you borrowed that reduces your loan balance. Interest is the cost of borrowing money. In early years, most of your payment goes to interest. As the loan progresses, more goes to capital.
Should I choose a shorter or longer mortgage term?
Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total borrowing costs. Choose based on your budget, financial goals, and risk tolerance.
How does the interest rate affect my payments?
Interest rates have a significant impact on both monthly payments and total borrowing costs. A 1% increase in rate can increase monthly payments by 10-12% and add tens of thousands to total interest over the loan term.
What other costs should I consider besides the monthly payment?
Consider arrangement fees, valuation costs, legal fees, stamp duty, buildings insurance, and potentially mortgage protection insurance. These can add several thousand pounds to your total mortgage costs.