Work out your monthly payments, total interest, and what your mortgage really costs — repayment or interest-only.
A mortgage is a loan secured against a property, repaid over a term — typically 25 years in the UK. Your monthly payment depends on the loan amount, interest rate and term. In 2026, typical fixed mortgage rates are around 4–5% for a 2-year fix and 4.2–4.8% for a 5-year fix depending on your loan-to-value ratio. On a £200,000 mortgage at 4.5% over 25 years, monthly repayments are approximately £1,111/month. On a £300,000 mortgage at 4.5% over 25 years, monthly repayments are approximately £1,667/month. Most lenders will offer 4 to 4.5 times your annual income as a maximum mortgage. A 10% deposit typically unlocks better rates than a 5% deposit. The average UK house price in 2026 is approximately £289,950.
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Most people use a mortgage calculator without fully understanding what drives the numbers. Here's a plain-English guide to the mechanics — how repayment works, what LTV means for your rate, and why two mortgages at the same rate can cost very different amounts.
Your monthly repayment mortgage payment is calculated using an amortisation formula that splits each payment into two components: interest (the cost of borrowing) and capital (the amount reducing your debt).
Most of your payment is interest. On a £250,000 mortgage at 4.5%, roughly £937/month goes to interest in year 1 — leaving only £400 reducing your actual debt.
As the balance falls, less interest accrues each month. The same payment starts reducing your debt much faster — most of year 20's payment is now capital.
The monthly payment formula is: P × [r(1+r)ⁿ] / [(1+r)ⁿ−1], where P is the loan amount, r is the monthly interest rate, and n is the total number of payments. The calculator above handles this for any input.
LTV (loan-to-value) is the percentage of the property value you're borrowing. On a £300,000 property with a £60,000 deposit, you're borrowing £240,000 — that's 80% LTV.
LTV is the single biggest factor in what rate a lender will offer you. The logic is simple: lower LTV means lower risk for the lender. If you default and they repossess, there's more buffer to recover the loan even if property prices dip.
The key break points are 60%, 75%, 80%, 85%, 90%, and 95%. Crossing from 81% to 79% LTV — by saving a slightly larger deposit — can cut your rate by 0.3–0.5%.
On a £250,000 mortgage over 25 years, a 1% higher rate adds roughly £130/month — that's £39,000 extra in interest over the full term.
If your deposit sits just below a threshold, it's worth considering whether gifted funds from family, or delaying purchase slightly to save more, crosses you into a lower rate band. Even half a point on the rate matters significantly at scale.
These are fundamentally different products, and choosing the wrong one is a serious financial risk.
Each payment reduces your debt AND pays the interest. At the end of the term, you own the property outright. Higher monthly payments, but you're building equity throughout.
Payments cover only interest. The full loan amount is still owed at the end of the term. Lower monthly payments, but you need a separate strategy to repay the capital.
Interest-only made sense when house prices were rising fast enough that selling covered the debt. In today's market, most lenders require a credible repayment vehicle (ISA, pension, investment portfolio) before approving interest-only. Residential interest-only is now mostly for buy-to-let landlords.
Overpaying is one of the best guaranteed returns available. Every pound you overpay reduces your outstanding balance, which reduces the interest accruing the following month. This compounds over time.
Important: Most fixed-rate mortgages allow up to 10% overpayment per year without early repayment charges (ERCs). Exceeding this triggers a charge, typically 1–5% of the overpayment amount. Check your mortgage offer before overpaying more than 10% of your outstanding balance in any 12-month period.
Use the overpayment field in the calculator above to see the exact impact for your mortgage figures.