How to use the mortgage calculator
- Enter the property price and your deposit, either in pounds or as a percentage.
- Add the interest rate you’ve been quoted (or a typical one if you’re just looking) and the mortgage term, up to 40 years.
- Choose repayment or interest only.
- You’ll see your monthly payment, how much you’d borrow, the total interest, the total you’d repay and your loan to value.
The calculator assumes the rate stays the same for the whole term and leaves out fees. In real life most people fix for two or five years and then remortgage, so treat the total interest as a guide rather than a bill.
How the maths works
A repayment mortgage uses a standard formula that sets one monthly payment which clears the loan exactly by the end of the term:
Monthly payment = L × r ÷ (1 – (1 + r)^-n)
- L is the loan
- r is the monthly interest rate (the yearly rate divided by 12, so 4.5% a year is 0.375% a month)
- n is the number of monthly payments (25 years is 300)
In the early years most of each payment is interest. As the balance falls, more of it pays off the loan itself. Interest only is simpler: the loan times the rate, divided by 12, and the loan never goes down.
Worked example: borrowing £250,000
Buy a £300,000 home with a £50,000 deposit and you borrow £250,000, a loan to value of 83.3%. At 4.5% over 25 years the calculator gives:
| Amount | |
|---|---|
| Monthly payment | £1,389.58 |
| Total interest | £166,874 |
| Total repaid | £416,874 |
The same loan on interest only is £937.50 a month, but you still owe the full £250,000 at the end. Including that final lump, you’d pay back £531,250.
Monthly payments on £250,000 by rate and term
| Rate | 15 years | 20 years | 25 years | 30 years | 35 years |
|---|---|---|---|---|---|
| 4% | £1,849 | £1,515 | £1,320 | £1,194 | £1,107 |
| 4.5% | £1,912 | £1,582 | £1,390 | £1,267 | £1,183 |
| 5% | £1,977 | £1,650 | £1,461 | £1,342 | £1,262 |
| 5.5% | £2,043 | £1,720 | £1,535 | £1,419 | £1,343 |
| 6% | £2,110 | £1,791 | £1,611 | £1,499 | £1,425 |
A longer term lowers the payment but costs more overall. At 5%, a 35 year term is £1,261.72 a month against £1,461.48 over 25 years, so about £200 a month less. But you’d pay £279,922 in interest instead of £188,443: £91,480 more.
How much do you need to earn for a £250,000 mortgage?
Most lenders will lend around 4 to 4.5 times your yearly income. Some go to 5 or 5.5 times, usually through a broker and with stricter checks, and a few offer 6 times for certain professions or high earners.
| Income multiple | Income needed for £250,000 |
|---|---|
| 4 times | £62,500 |
| 4.5 times | £55,556 |
| 5 times | £50,000 |
| 5.5 times | £45,455 |
| 6 times | £41,667 |
Buying with someone else? Lenders add your incomes together, so at 4.5 times you could each earn about £27,778. Run your salary through my take home pay calculator to check the monthly payment fits comfortably in what you actually take home.
How much deposit do you need?
The minimum is usually 5% to 10% of the property price, not the loan. So a £250,000 mortgage with a 10% deposit means buying a £277,778 home with £27,778 down.
| Deposit | Property price | Deposit amount | Loan to value |
|---|---|---|---|
| 5% | £263,158 | £13,158 | 95% |
| 10% | £277,778 | £27,778 | 90% |
| 15% | £294,118 | £44,118 | 85% |
| 20% | £312,500 | £62,500 | 80% |
| 25% | £333,333 | £83,333 | 75% |
Loan to value (LTV) is how much you borrow compared with the price. A lower LTV usually gets a better rate because you’re less of a risk to the lender, and rates tend to improve at each 5% step. Even a few thousand more on your deposit can save you a lot over the term.
Expect to need a bigger deposit for a buy to let (often 20% to 25% or more) or if your credit history has problems. 95% mortgages are out there for first time buyers, but the rates are higher.
Repayment or interest only?
Repayment: each payment covers the interest plus a chunk of the loan, so you own the home outright at the end. It’s the most common choice and the lowest risk.
Interest only: you only pay the interest, so payments are lower, but the whole loan is still there at the end. Lenders want proof of a solid plan to pay it off, like investments, savings or selling the property. If that plan falls short, you could have to sell or carry the debt into retirement.
| Rate (£250,000, 25 years) | Repayment | Interest only | Difference a month |
|---|---|---|---|
| 4% | £1,319.59 | £833.33 | £486.26 |
| 4.5% | £1,389.58 | £937.50 | £452.08 |
| 5% | £1,461.48 | £1,041.67 | £419.81 |
| 5.5% | £1,535.22 | £1,145.83 | £389.39 |
At 5% over 25 years, repayment costs £188,443 in interest (£438,443 in total). Interest only costs £312,500 in interest and you still owe £250,000, so £562,500 in total: £124,057 more.
Interest only is mostly used for buy to let and by people with big assets elsewhere. For most homebuyers, repayment is the safer, cheaper choice. More in my guide to interest only mortgages.
How to lower your monthly payments
- Stretch the term. Lower payments, more interest overall. Most lenders cap the term at 40 years and won’t let it run past your retirement age. You can shorten it again when you remortgage.
- Lower your loan to value. On a £100,000 home, a £90,000 loan is 90% LTV and a £60,000 loan is 60%. A bigger deposit, or equity you’ve built up, gets you cheaper rates.
- Remortgage before your deal ends so you don’t drift onto the lender’s standard variable rate.
- Overpay when you can. It won’t cut your payment straight away, but it cuts the interest. My guide on paying off your mortgage faster shows how.
Types of mortgage
- Fixed rate: the rate stays the same for a set time, usually 2, 5 or 10 years. Leave early and you’ll usually pay an early repayment charge (ERC).
- Standard variable rate (SVR): the lender’s own rate, which you move onto when a deal ends. It’s usually much higher.
- Tracker: follows the Bank of England base rate, so payments go up and down with it.
- Discounted rate: a discount off the lender’s SVR for a set time, often 2 to 5 years.
- Offset: your savings sit alongside the mortgage and reduce the balance you pay interest on.
- Buy to let: for property you rent out. Bigger deposits and higher rates.
- Guarantor: a family member or close friend promises to pay if you can’t, which can help if you have a short credit history or a low income.
- Equity release: for older homeowners who want to borrow against their home without selling. Interest usually rolls up onto the loan.
- Interest only: covered above.
New to all this? Start with what is a mortgage.
Remortgaging and comparing deals
Remortgaging means switching to a new deal with your current lender or a new one. Most people do it when a fixed rate ends, to avoid the standard variable rate. Start looking around six months before your deal ends so there’s time to sort the paperwork.
When you compare deals, look at the total cost over the fixed period, fees included, not just the rate. A low rate with a big fee can cost more than a slightly higher rate with no fee.
The easiest way to find the best deal is a mortgage broker. Banks don’t reward loyalty, while a broker searches lenders for you, knows who’s likely to accept you and handles the paperwork.
Free mortgage advice
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What to do next
- Buying a house: all my home buying guides.
- Repayment mortgages explained and should I fix my mortgage?
- Lifetime ISA calculator: see how the 25% bonus could boost your deposit.
- Podcast: Jinesh Vohra on how to pay off your mortgage faster.
- Podcast: Dan Knott on navigating the mortgage maze.
Mortgage calculator FAQs
How are mortgage repayments worked out?
For a repayment mortgage, a standard formula spreads the loan and interest into equal monthly payments over the term. For interest only, it’s the loan times the rate, divided by 12.
What is loan to value?
Loan to value (LTV) is the loan as a percentage of the property price. Borrow £225,000 on a £250,000 home and your LTV is 90%. Lower LTVs usually get better rates.
How long can a mortgage term be?
Usually up to 40 years, and most lenders won’t let it run past your retirement age. The calculator goes up to 40 years.
Does the calculator include fees?
No. Most deals have an arrangement fee, and you may have valuation and legal costs too. Add them to your comparison separately.
What interest rate should I use?
Use the rate you’ve been quoted. If you’re just exploring, the calculator starts at 4.5% as an example. A broker can tell you what rates you’re likely to get for your deposit and credit history.