How to Calculate Mortgage Repayments

Mortgage repayments are mainly driven by the loan amount, interest rate, and term. For a quick estimate, use the mortgage calculator to compare different deposits, rates, and repayment periods.

The short version

For a repayment mortgage, the monthly payment is based on the amortisation formula:

M = P x r(1 + r)^n / ((1 + r)^n - 1)

• M is the monthly repayment.
• P is the mortgage balance.
• r is the monthly interest rate.
• n is the number of monthly payments.

This estimates principal and interest. It does not automatically include insurance, property tax, service charges, broker fees, or future rate changes.

Try it with your own numbers

Use the mortgage calculator for the main repayment estimate, then use the loan-to-value calculator to check deposit strength and the stamp duty calculator for UK property-tax estimates.

How the calculation works

First calculate the mortgage balance. If the property costs 300,000 and the deposit is 60,000, the mortgage balance is 240,000.

Then convert the annual rate into a monthly rate. A 5% annual rate becomes 0.05 / 12. A 25-year mortgage has 25 x 12 = 300 monthly payments.

The repayment formula spreads the debt and interest across the term so that each monthly payment is the same if the rate stays fixed.

A worked example

Suppose:

• Property price: 300,000
• Deposit: 60,000
• Mortgage balance: 240,000
• Rate: 5%
• Term: 25 years

The monthly rate is 0.05 / 12. The number of payments is 300. Using the repayment formula, the estimated monthly principal and interest payment is about 1,403.

The total paid over 25 years would be about 420,900, so the interest cost is about 180,900 if the rate never changes.

Watch-outs

• Calculating repayments from the property price instead of the mortgage balance.
• Forgetting arrangement fees or adding them to the wrong place.
• Comparing a 20-year term with a 35-year term using only the monthly payment.
• Ignoring what happens when a fixed rate ends.
• Treating estimates as mortgage approval.

How to read the result

Use the repayment figure to test affordability before speaking to a lender or broker. Compare monthly payment, total interest, and term together. A longer term may lower the payment but usually increases total interest.

Mortgage calculations are estimates. Lending rules, fees, taxes, and personal affordability checks can change the actual offer.

Tools mentioned in this article

• Loan-to-value calculator
• Mortgage overpayment calculator
• Offset mortgage calculator
• Moving costs calculator
• Finance calculators

Reader questions

Why does the first payment not reduce the balance by much?

Early payments include more interest because the outstanding balance is still high. More of each payment goes toward principal later in the term.

Does a bigger deposit reduce repayments?

Yes. A bigger deposit reduces the amount borrowed and may also improve the loan-to-value band available from lenders.

Should I compare monthly payment or total interest?

Compare both. Monthly payment shows affordability, while total interest shows long-term cost.

Does this work for interest-only mortgages?

No. A repayment mortgage formula pays down principal and interest. Interest-only payments use a simpler interest calculation but leave the original balance unpaid.