Mortgage calculator

What the monthly payment is actually made of

A repayment mortgage payment is one number doing two jobs. Part of it is interest — the rent you pay the lender for the money still outstanding this month. The rest is capital, the slice that permanently reduces the debt. The split is not fixed: early on, most of the payment is interest, because the balance is at its largest. As the balance falls, the interest portion shrinks and the capital portion grows, which is why the last years of a mortgage clear the debt far faster than the first.

The payment itself is set by an annuity formula so that the amount stays level across the term. Three inputs drive it: the amount borrowed, the interest rate, and the number of months. Change any one and the payment moves — but they do not move it by the same amount, which is the single most useful thing to understand before you talk to a broker.

Which input moves the number most

Rate changes hit hardest on large balances and long terms. Term changes work the other way: stretching from 25 to 35 years lowers the monthly payment noticeably, but the total interest paid rises sharply because the balance stays high for longer. Deposit size matters twice over — it reduces the amount borrowed and usually moves you into a lower loan-to-value band, which is where lenders price their better rates.

Worked example: a first purchase

Say the property is 300,000 and you have a 45,000 deposit, so you borrow 255,000 at 4.6% over 30 years. The payment lands near 1,308 a month. In the first month roughly 977 of that is interest and only about 331 reduces the balance. Fast-forward fifteen years and the split has almost reversed.

Now change one thing: overpay by 150 a month from the start. The term shortens by several years and the total interest bill drops substantially, because every extra pound removes not just itself from the balance but all the future interest that pound would have generated. That compounding-in-reverse effect is why overpayments early in a mortgage are worth far more than the same overpayments made later.

What this calculator deliberately leaves out

• Fixed-rate periods. Most mortgages fix for 2–5 years and then revert to a variable rate. This tool models a single rate for the whole term, so treat the result as the cost if today's rate lasted.
• Arrangement, valuation and legal fees, and any fee added to the loan rather than paid up front.
• Buildings insurance, service charges, ground rent and, in the UK, stamp duty on purchase.
• Early repayment charges, which often apply during a fixed period and can cap how much you may overpay each year.
• Affordability stress tests. Lenders check you could still pay at a higher rate than the one they quote you.

How to sanity-check a lender's illustration

When an offer arrives, put the same three numbers into the calculator above. If the monthly figure differs by more than a pound or two, something in the paperwork is not what you assumed — commonly a fee rolled into the loan, a slightly different term, or interest charged daily versus monthly. That is a question worth asking before you sign, not after.