How UK mortgage repayments are calculated
A capital repayment mortgage normally uses the amount borrowed, interest rate and mortgage term to calculate a regular payment. Each payment covers interest and repays part of the capital. The interest share is generally greater near the beginning, while more capital is repaid later as the balance falls.
An interest-only mortgage works differently because the monthly payment usually covers interest without repaying the original capital. A credible repayment strategy is needed for the balance due at the end. Unless stated otherwise, the calculators in this section model capital-and-interest repayment mortgages.
Deposit and loan-to-value
The deposit is the portion of the property price paid from your own funds. The remaining amount is financed by the mortgage. Loan-to-value divides the mortgage by the property value. For example, a £240,000 mortgage on a £300,000 property has an 80% LTV and represents a £60,000 deposit before purchase costs.
A larger deposit produces a lower LTV and may provide access to different products or rates. It does not guarantee approval, and using all available savings for the deposit can leave too little for fees, repairs and emergencies.
Fixed, tracker, variable and follow-on rates
A fixed rate normally applies for an initial deal period rather than the entire mortgage term. A tracker rate follows a specified reference rate plus or minus a margin. Other variable rates can change under the mortgage conditions. When an introductory deal ends, the mortgage may move to a lender’s follow-on or standard variable rate unless a new deal is arranged.
A simple repayment estimate usually holds the entered rate constant. Test more than one rate to understand how a future change could affect the monthly payment.
Mortgage rate, APRC and product fees
The initial interest rate determines repayments during the deal period. APRC is a regulated measure intended to show the overall annual cost across the mortgage under specified assumptions. A deal with a lower initial rate can still cost more over the period you keep it if it has a large product fee.
Compare the initial rate, APRC, product and adviser fees, cashback, valuation and legal incentives, early repayment charges, follow-on rate and the cost over a relevant time horizon.
Property taxes differ across the UK
Stamp Duty Land Tax applies in England and Northern Ireland, Land and Buildings Transaction Tax applies in Scotland, and Land Transaction Tax applies in Wales. The amount can depend on price, first-time-buyer status, residence and ownership of other property. Calculate the relevant tax separately using current official rules.