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Mortgage Repayment Calculator
Calculate monthly repayments, total interest, and amortisation schedule. Model overpayments, stress test at higher rates, and check affordability.
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How mortgage repayments are calculated
The cost of a mortgage is determined by three variables: the amount borrowed (the principal), the interest rate, and the mortgage term. Monthly repayment amounts are calculated using a standard amortisation formula that spreads your repayments evenly across the entire term. For a repayment mortgage, each payment is the same amount every month — though the composition of that payment shifts over time, with less going to interest and more to principal as the balance falls.
In the early years of a repayment mortgage, the vast majority of your monthly payment covers interest. A £250,000 mortgage at 4.5% over 25 years has a monthly payment of around £1,389. In the first month, approximately £938 of that goes to interest — almost 68%. Over time, as the balance falls, the interest portion shrinks. By year 20, most of each payment is reducing the principal. This is why overpayments made early in a mortgage term have such a disproportionate impact: they reduce the balance when interest is at its highest.
Overpayments are one of the most effective things a mortgage holder can do. Most fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Even modest additional payments compound significantly over a 25-year term. An additional £200 per month on a £250,000 mortgage at 4.5% could save over £30,000 in interest and reduce the term by more than four years. Our calculator models overpayments so you can see the exact impact of any amount.
Mortgage affordability stress tests are now standard practice for UK lenders following the Mortgage Market Review. Lenders must verify that you can afford repayments if interest rates were to rise — typically by at least 3 percentage points above the revert rate. Our stress test feature allows you to model your repayments at different rates so you can make an informed decision before committing. If repayments at a higher rate would be unmanageable, that's important to know before you complete.
FAQ
Frequently asked questions
What's the difference between a repayment and interest-only mortgage?
A repayment mortgage (capital and interest) means each monthly payment covers both the interest accruing on the outstanding balance and a portion of the principal. Over the term, the balance reduces to zero. An interest-only mortgage means you pay only the interest each month — the principal doesn't reduce, and you must repay the full original loan at the end of the term. Most residential mortgages are repayment mortgages; interest-only is more common for buy-to-let.
How is my monthly payment calculated?
Monthly repayments on a repayment mortgage are calculated using the standard amortisation formula: M = P[r(1+r)^n]/[(1+r)^n-1], where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. In the early years, most of your payment covers interest; later in the term, more goes toward reducing the principal.
How much can I borrow?
UK mortgage lenders typically offer loans of 4 to 4.5 times your gross annual income, though higher income multiples are available depending on your circumstances and the lender. Lenders also apply affordability stress tests — they must check you can afford repayments if interest rates rise by at least 3 percentage points. Deposit size affects both how much you can borrow and the interest rates available to you.
What effect do overpayments have?
Overpayments can significantly reduce the total interest you pay and the length of your mortgage. Any extra amount you pay above your required monthly payment goes directly toward reducing the principal. As the principal falls faster, less interest accrues, and the impact compounds over time. Even modest monthly overpayments of £100-200 can save tens of thousands of pounds and cut years off a 25-year mortgage term. Most fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty.
What happens when my fixed rate ends?
When a fixed-rate period ends, you typically move onto your lender's Standard Variable Rate (SVR), which is usually higher — sometimes significantly so. Most borrowers remortgage to a new deal before their fixed rate expires to avoid paying the SVR. It's wise to start looking at remortgage options around 3-6 months before your fixed rate ends, as there are often early repayment charges if you switch during the fixed period.
Is mortgage interest tax deductible?
For owner-occupiers, mortgage interest is not tax deductible — this relief was abolished in the UK in 1999. For buy-to-let landlords, mortgage interest is no longer fully deductible either since the tax change phased in from 2017. Instead, landlords can now only claim a basic-rate tax credit (20%) on mortgage interest, regardless of their marginal rate. This significantly increased the tax burden for higher-rate taxpayer landlords.
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