Taking out a mortgage is likely the largest financial commitment of your life. Understanding exactly how monthly payments are calculated · and what the total cost of a mortgage is over its lifetime · puts you in a much stronger position whether you are a first-time buyer, remortgaging, or comparing deals.
This guide walks you through every figure in the mortgage calculator and explains what each one means.
Loan-to-value is the size of your mortgage expressed as a percentage of the property value. If you buy a £250,000 home with a £50,000 deposit, you borrow £200,000 · an LTV of 80%.
LTV matters because lenders price their risk based on it. The lower the LTV, the less risk for the lender, and the better the interest rate they are willing to offer you. The key thresholds where rates typically improve are at 90%, 85%, 80%, 75% and 60% LTV.
Saving a larger deposit not only reduces the amount you borrow but can also push you into a lower LTV bracket with better interest rates, saving you significantly over the mortgage term.
There are two main mortgage types in the UK:
Repayment (capital and interest) · your monthly payment covers both the interest on the loan and a portion of the capital (the amount you owe). By the end of the term, you have repaid the entire loan and own the property outright. This is the standard choice for residential mortgages and is what our calculator defaults to.
Interest-only · your monthly payment covers only the interest. The capital remains unchanged throughout the term. At the end, you still owe the original loan amount and need a separate "repayment vehicle" to pay it off (such as investments, savings or a sale of the property). Interest-only mortgages are now mainly available to buy-to-let investors and high net worth borrowers.
For most homeowners, a repayment mortgage is the safer choice because you are guaranteed to own your home outright at the end of the term.
The monthly payment on a repayment mortgage is calculated using a standard formula that accounts for compound interest. The formula ensures that each payment covers the monthly interest charge while also reducing the outstanding balance.
In the early years of the mortgage, most of each payment goes towards interest. Over time, as the balance reduces, an increasing proportion goes towards repaying capital. This is called amortisation.
The formula uses three inputs: the loan amount (principal), the monthly interest rate (annual rate divided by 12), and the number of monthly payments (term in years multiplied by 12).
The total interest figure shows how much you will pay in interest charges over the full term. This is often a startling number · on a 25-year mortgage it is not unusual for total interest to equal or exceed the original loan amount.
Total interest depends heavily on the interest rate and the term. Even a small reduction in your interest rate or a few years off your term can save tens of thousands of pounds. This is why overpayments are so powerful.
Making overpayments · paying more than your required monthly amount · reduces your outstanding balance faster. This has two effects:
Most UK mortgages allow you to overpay by up to 10% of the outstanding balance per year without incurring early repayment charges. Check your mortgage terms before making overpayments.
Even small regular overpayments make a significant difference. Overpaying by just £100 per month on a £200,000 mortgage at 4.5% over 25 years saves over £14,000 in interest and cuts more than two years off the term.
Enter your loan amount, rate and term to see your monthly payment and the total cost of your mortgage.
Open Mortgage Calculator →| Loan Amount | £200,000 |
| Annual Interest Rate | 4.5% |
| Term | 25 years (300 months) |
| Monthly Payment | £1,111.85 |
| Total Amount Repaid | £333,555 |
| Total Interest Paid | £133,555 |
At 4.5%, the monthly payment on a £200,000 mortgage over 25 years is £1,111.85. Over the full 25 years, you repay £333,555 in total · meaning the interest bill is £133,555, or 66.8% of the original loan amount.
If you could secure a rate of 4.0% instead, the monthly payment falls to £1,055.89, and total interest drops to £116,768 · a saving of £16,787 over the term.
The mortgage calculator shows the core capital and interest payment. Your actual monthly outgoing may be higher if your lender requires building insurance or life insurance to be arranged through them, or if your mortgage payment includes a service charge for a leasehold property. Arrangement fees added to the loan will also increase the amount on which interest accrues.
Use our free mortgage calculator to work out your monthly payment and total interest in seconds.
Open Calculator →Most UK lenders will lend up to 4.5 times your annual income, though some lend up to 5 or even 5.5 times for certain applicants. Income multiples are not the only factor · lenders also assess your expenditure, credit history and the property itself. Use our affordability calculator to get a rough guide based on your income and outgoings.
A 2-year fix gives you flexibility to remortgage sooner if rates fall. A 5-year fix provides certainty for longer and often carries lower early repayment charges per year. The right choice depends on your view of where rates are heading and how important payment stability is to you. A whole-of-market mortgage broker can help you compare options.
Most UK mortgage lenders allow overpayments of up to 10% of the outstanding balance per year without early repayment charges. This allowance usually resets each year. Check your mortgage offer or contact your lender to confirm your specific terms before making overpayments.
For informational purposes only · Not financial advice · Tax rates shown are for 2026/27