How to work out your mortgage repayments

How to work out your mortgage repayments

By Nicky Burridge

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Need to work out your mortgage repayments? You can use our mortgage calculator - or challenge yourself to some mental maths with our mortgage calculation formulas. 

You've found a property you want to buy. But before you put in an offer, you want to make sure you can afford it. 

Mortgage calculator tool

Our mortgage calculator tool can be found on any of our property listings pages. 

Simply scroll down towards the bottom and put in the amount you wish to borrow for the mortgage, your deposit amount, the interest rate and then repayment term.

Our mortgage calculator will instantly work out your monthly repayments.

Mortgage calculator tool

How to work out your mortgage repayments yourself

If you love a mental maths challenge, here’s how you can work out approximately what your monthly mortgage repayments will be without using a mortgage calculator.

1: Work out the mortgage debt

The first thing you need to do is calculate your mortgage debt, also known as the principal. This refers to the amount you are borrowing. 

It’s easy to calculate. Simply take the purchase price of the property and subtract from it the deposit you have saved.

For example, if you're buying a home for £200,000 and have a deposit of £50,000, your mortgage debt will be £150,000.

2: Find out how much interest you'll be paying

Take a look at a mortgage you’re thinking of applying for to see what the annual interest rate is. This will usually be listed as the initial interest rate.

3: Decide what your mortgage term will be

The mortgage term is the period of time over which you plan to repay the mortgage debt. 

Mortgage terms used to be 25 years, however, they can now be 35 years or more. 

The advantage of having a longer mortgage term is that your monthly repayments will be lower. 

But the downside is that it will take longer to clear the debt. You’ll end up paying more in interest too.

What is the formula for calculating a 30-year mortgage?

Ok, now you have that information, you’re ready to work out what your monthly repayments will be for a 30 year mortgage.

1: First, calculate how much your interest payments will be each month.

To do this, multiply the total amount you're borrowing by the annual mortgage interest rate. 

The interest rate needs to be expressed as a decimal, so 2.5% is 0.025.

For example: £150,000 (mortgage debt) x 0.025% (annual interest) = £3,750.

Then you'll need to divide it by 12 (the number of months in a year) to work out your monthly interest payments:

£3,750 ÷ 12 = £312.50

How are principal repayments calculated?

The formula for this calculation is really complicated. It looks like this:

A = P (r (1+r)^n) / ( (1+r)^n -1 )

So, we're going to cheat a bit and look at how much of the principal you will repay each month on average throughout the mortgage term. 

Mortgages are structured so that your repayments remain the same throughout the term, as long as interest rates don’t change. 

As a result, in the early years, most of your monthly payments will cover the interest and only a small amount will reduce the debt. 

Towards the end of the mortgage term, it will be the other way around.

1: First, multiply the number of years in your mortgage term by 12 (the number of months in a year) to get the total number of payments you will make. 

For example, a 30-year mortgage will have 360 payments: 30 x 12 = 360.

2: Next, divide your mortgage debt by the number of repayments you will make.

For example, £150,000 ÷ by 360 = £416.67

This means, on average over 30 years, you’ll repay £416.67 of your outstanding debt each month.

3: Next, we need to work out what your average interest payments will be. To do this, we will base our calculations on the mid-point of your mortgage.

Roughly speaking, when you're halfway through your mortgage term, you'll have repaid around one-third of your debt. 

So now, redo your interest calculation but as if you had repaid one third of your mortgage debt.

For example, £150,000 ÷ 3 is £50,000. Meaning you have repaid £50,000 and have £100,000 still outstanding.

4: Next, work out what monthly interest payments will be on this amount:

£100,000 (mortgage debt) x 0.025% (annual interest) = £2,500

Then divide this by 12 to get the monthly interest payment.

£2,500 ÷ 12 = £208.33

5: Finally, add the new monthly interest calculation to your average monthly capital repayments:

£208.33 + £416.67 = £625

An adult working out calculations on their phone and laptop

How much are monthly repayments on a £150,000 mortgage in the UK?

Based on a mortgage term of 30 years and an interest rate of 2.5%, the amount you’d repay each month on £150,000 is £597. 

So, you can get a good idea of what your repayments would be by doing the calculations set out above.

What's an easy way to calculate your mortgage repayments?

If that all feels like too much maths, there’s an easier way to do the calculation.

For a 30-year mortgage, monthly repayments will be £40 for every £10,000 you have borrowed if your annual mortgage interest is 2.5%.

Use this as a building block to work out how much you would pay each month.

Start by dividing your mortgage debt by £10,000.

For example, £150,000 ÷ £10,000 = 15

Next, multiply your answer by £40

For example, 15 x £40 = £600

Again, this is pretty close to the actual amount of £597.

As a general rule, every 0.25% increase in your mortgage rate will add around £2 to your repayments for every £10,000 you have borrowed.

For example, if your mortgage interest is 3.0% not 2.5%, you’ll need to add an additional £4 to your repayments for every £10,000 of mortgage debt. 

So you would be paying £44 in interest per £10,000 borrowed.

Equally, if your mortgage rate is 2.0%, subtract £4 for every £10,000 borrowed. So you’d be paying £36 in interest per £10,000 borrowed.

What are the monthly repayments for a 20 year mortgage?

If you’ve opted for a shorter mortgage term of 20 years, you’ll need to use different building blocks.

In this case, your monthly repayments will be £53.50 for every £10,000 you have borrowed. This is based on an annual mortgage interest rate of 2.5%. 

Every 0.25% increase in the mortgage interest rate would add around £1.25 per £10,000 borrowed to your monthly repayments.

Is there anything else I need to think about?

Yes, there are two other things you need to consider.

Firstly, many mortgages come with arrangement fees and other set up charges. These can be as high as nearly £2,000. 

You can either pay these upfront or have them added to your mortgage debt. If you do the latter, be sure to include these fees in your calculations.

Secondly, your mortgage repayments will only stay the same each month if you opt for a fixed rate deal. 

Under the terms of a fixed rate mortgage, the interest rate you pay is fixed for the product term. This is typically two or five years. 

If you choose a variable rate or tracker rate mortgage, your monthly repayments will move up and down in line with changes to the Bank of England base rate. 

What changing interest rates could mean for you.

It’s difficult to factor this into your calculations, as no-one knows how interest rates will change in the future. But it’s something to think about if you’re on a variable or tracker rate mortgage.