UK mortgage calculator

How mortgage repayments are calculated

Monthly repayments on a standard repayment mortgage use what's called the annuity formula. Each payment covers two things: the interest charged that month, plus a slice of the original loan (the capital). Early on, most of your payment goes toward interest. Over time, more goes toward capital as the outstanding balance shrinks.

The formula is M = P x [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments. On a £250,000 mortgage at 4.5% over 25 years, that gives you £1,390/month. Of that first payment, £938 is interest and only £452 goes toward the actual debt.

By year 15, the split flips. You're paying more capital than interest each month. And in the final year, almost the entire payment is capital with just a few pounds in interest. This is why overpaying early in your mortgage term saves you the most money.

Repayment vs interest-only: which type?

With a repayment mortgage, you pay capital and interest each month. At the end of the term, the loan is cleared and you own the property outright. This is what most residential buyers choose, and most lenders require it for first-time buyers.

Interest-only means you pay just the interest each month. The original loan stays untouched and must be repaid in full at the end (typically by selling the property, using savings, or from investments). Monthly payments are much lower: on £250,000 at 4.5%, interest-only costs £938/month vs £1,390 for repayment. But you still owe the full £250,000 after 25 years.

Interest-only is mostly used by buy-to-let investors who plan to sell the property, or by borrowers with a clear repayment strategy (like an investment portfolio). Most high-street lenders won't offer residential interest-only without proof you can repay the capital at the end.

What determines your mortgage rate?

The rate a lender offers you depends on several things, and the differences can be worth thousands over a 5-year fix:

• Loan-to-value (LTV): the lower your deposit relative to the property price, the higher the rate. Best rates sit at 60% LTV or below. At 90% LTV expect to pay 0.5-1% more.
• Bank of England base rate: variable and tracker mortgages follow it directly. Fixed rates are influenced by swap rates in the financial markets, which often move ahead of base rate changes.
• Credit history: missed payments, defaults, or CCJs mean higher rates or outright refusal from mainstream lenders. A clean record for 6+ years gives access to the best deals.
• Product type: 2-year fixes tend to be cheaper than 5-year fixes, but you pay an arrangement fee every 2 years. Over 10 years, a 5-year fix can work out cheaper despite the higher headline rate.
• Term length: a 35-year term reduces monthly payments but costs tens of thousands more in total interest compared to 25 years.

How much can you actually borrow?

UK lenders typically offer between 4 and 4.5 times your annual household income. On a single salary of £50,000, that's £200,000 to £225,000. A joint application on £50K + £35K (£85K combined) could get you £340,000 to £382,500.

But the income multiple is just the starting point. Lenders also run a "stress test": could you still afford payments if rates jumped by 3%? They look at your committed spending too. Credit card minimums, car finance, student loan repayments, childcare costs. All of these reduce what they'll lend you.

Some specialist lenders go up to 5x or even 6x salary for high earners (usually £75K+), professionals (doctors, lawyers, accountants), or borrowers with large deposits. And if you're buying with a Help to Buy ISA or Lifetime ISA bonus, that counts toward your deposit for LTV purposes.

For a personalised estimate based on your salary and outgoings, try our affordability calculator.

Worked example: £200,000 mortgage at different rates

Worked example: how term length changes your costs

The power of overpayments

Most mortgage lenders let you overpay up to 10% of your outstanding balance per year without an early repayment charge. On a £250,000 mortgage at 4.5% over 25 years, overpaying just £100/month from day one knocks 4 years and 2 months off your mortgage and saves you £28,400 in interest.

Overpaying £200/month saves £48,900 and clears the mortgage 7 years early. That's the difference between being mortgage-free at 53 versus 60 (if you took it out at 35).

The maths works because overpayments reduce your outstanding balance, which means less interest is charged the following month. It compounds. And the earlier you overpay, the bigger the impact because the interest would have compounded for longer. £100 overpaid in year 1 saves more than £100 overpaid in year 15.

Use our overpayment calculator to see exactly how much you'd save on your specific mortgage.

Stamp duty: what you'll pay on top

Stamp Duty Land Tax (SDLT) applies to property purchases in England and Northern Ireland. Scotland has LBTT and Wales has LTT, with different bands. For England, the current rates from April 2025:

• £0 to £125,000: 0%
• £125,001 to £250,000: 2%
• £250,001 to £925,000: 5%
• £925,001 to £1,500,000: 10%
• Over £1,500,000: 12%

First-time buyers get relief: no stamp duty on the first £300,000 of properties up to £500,000. On a £350,000 first home, you'd pay 5% on the £50,000 above £300K = £2,500. A non-first-time buyer would pay £7,500 on the same property.

Second homes and buy-to-let properties attract a 5% surcharge on top of the standard rates. So a £300,000 second property costs £20,000 in stamp duty (£5,000 standard plus £15,000 surcharge) vs £0 for a first-time buyer's primary residence at the same price. That's a £20,000 difference.

Our stamp duty calculator gives you the exact figure for your situation.

Fixed vs variable: which to choose in 2026

Fixed rates give you certainty. Your payment stays the same for 2 or 5 years regardless of what the Bank of England does. You can budget precisely. The downside: if rates fall, you're stuck paying the higher fixed rate until your deal ends (or you pay the early repayment charge to exit).

Variable rates (trackers and SVRs) follow the base rate. When it drops, your payment drops. But when it rises, so does your payment, sometimes by hundreds of pounds per month with little warning. The Bank of England base rate sat at 0.1% for years, then shot up to 5.25% between 2022 and 2024. Tracker mortgage holders saw payments increase by over £500/month in some cases.

In 2026, with the base rate gradually declining from its peak, many borrowers are choosing 2-year fixes to lock in current rates while keeping the option to remortgage at a potentially lower rate in 2028. But nobody knows where rates will go. If certainty matters to you, a 5-year fix removes the guesswork entirely.

What first-time buyers need to know

The minimum deposit for most lenders is 5% of the property price. On a £250,000 home, that's £12,500. But you'll get much better rates at 10% (£25,000) or 15% (£37,500). The jump from 95% LTV to 85% LTV can save you 0.5-1% on your rate, which over 25 years is tens of thousands of pounds.

On top of the deposit, budget for: solicitor fees (£1,000-£2,000), survey (£300-£700), mortgage arrangement fee (£0-£1,500, often added to the loan), and moving costs. A realistic total for a £250K purchase with 10% deposit is around £30,000-£32,000 cash needed upfront.

The mortgage application process takes 4-8 weeks from application to offer. You'll need 3 months of payslips, 3 months of bank statements, your latest P60, proof of deposit source, and ID. Self-employed borrowers need 2-3 years of accounts or SA302 tax calculations.

When to remortgage

Your fixed rate deal will end after 2 or 5 years. At that point, your lender moves you onto their Standard Variable Rate (SVR), which is almost always 1-2% higher than the best fixed deals available. On a £200,000 balance, that could mean an extra £150-£200/month for doing nothing.

Start looking at remortgage deals 3-4 months before your fix ends. Most lenders let you lock in a new rate up to 6 months in advance without obligation. If rates drop before completion, you can often switch to the cheaper deal. If they rise, you've already secured the lower rate.

Remortgaging costs: valuation fee (often free with a new lender), solicitor/conveyancer (£300-£500, sometimes free as part of the deal), and potentially an arrangement fee (£0-£1,500). Even with fees, switching from SVR to a competitive fix almost always saves money within the first few months.

How we built this calculator

Our mortgage calculator uses the standard annuity formula used by all UK lenders. It runs entirely in your browser; we don't store your inputs or send data anywhere. The amortisation schedule shows you how the balance decreases year by year, and the bar chart gives you a visual of your equity building over time.

For stamp duty calculations, we use the current HMRC rates published on gov.uk. The affordability calculator uses the standard 4-4.5x income multiple with a 3% stress test, matching how most mainstream lenders assess applications.

If you spot an error or something doesn't match what your lender has quoted, let us know. We verify all calculations regularly against published Bank of England and HMRC data.

What salary do you need for your mortgage?

Lenders typically offer 4 to 4.5 times salary. Working backwards from common mortgage amounts:

Joint applications add both salaries together. Want to check what your actual take-home pay looks like on those salary figures? Use our UK salary calculator to see exactly how much hits your bank account each month after tax, NI, student loan and pension.