Work out your monthly payments, total interest, and amortisation schedule
Extra monthly payment towards your mortgage balance
When you take out a mortgage to buy a property, you borrow money from a lender and agree to pay it back over a set period (the mortgage term), typically 25 to 35 years. Your monthly repayment consists of two components: the capital (the amount you borrowed) and the interest (the lender's charge for lending you the money).
With a repayment mortgage (also called a capital repayment mortgage), each monthly payment covers both interest and a portion of the capital. In the early years, a larger proportion of your payment goes towards interest, but over time, more of each payment goes towards reducing the capital balance. By the end of the term, you will have repaid the entire loan.
With an interest-only mortgage, your monthly payments only cover the interest charges. The capital balance remains unchanged throughout the term, and you must repay the full loan amount at the end. This means lower monthly payments but requires a separate repayment strategy.
Mortgage interest rates come in several forms. A fixed rate stays the same for a set period (commonly 2 or 5 years), giving you certainty about your monthly payments. A variable rate can change over time, usually tracking the Bank of England base rate or the lender's standard variable rate (SVR).
The interest rate you're offered depends on several factors, including your loan-to-value (LTV) ratio, credit score, income, and the current economic environment. Generally, the lower your LTV (i.e., the larger your deposit), the better the interest rate you'll be offered.
Loan-to-value (LTV) is the ratio of your mortgage amount to the property's value, expressed as a percentage. For example, if you buy a £300,000 property with a £30,000 deposit, your LTV is 90%. Lenders typically offer better rates at lower LTV thresholds — 60%, 75%, and 90% are common breakpoints. A lower LTV also means you've built more equity in your property from day one.
Making regular overpayments on your mortgage can save you thousands of pounds in interest and help you become mortgage-free sooner. Even modest overpayments can have a significant impact over the life of a mortgage. For example, overpaying by just £100 per month on a £200,000 mortgage at 4.5% over 25 years could save you over £15,000 in interest and reduce your term by several years.
Most lenders allow overpayments of up to 10% of the outstanding balance per year without penalty, though this varies. Always check your mortgage terms before making additional payments.
Your monthly mortgage payment isn't the only cost of buying a home. You should also budget for:
Use our take-home pay calculator to understand how much of your salary is available for mortgage payments and other living costs after tax.
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