How the payment is worked out
A repayment mortgage has the same payment every month. Part of it pays the interest on what you still owe and the rest pays off the loan, so early payments are mostly interest and later ones mostly loan. The level payment comes from the standard formula:
M = P × i ÷ (1 − (1 + i)^−n)
P is the amount borrowed, i the monthly rate (the yearly rate ÷ 12 ÷ 100) and n the number of monthly payments. Each payment is rounded to the penny, and the last one clears whatever is left, so the payments always add up to exactly the loan plus the interest.
Monthly payments on 200,000
Worked out by this calculator, at a fixed rate for the whole term:
| Rate | Term | Monthly payment | Total interest |
|---|---|---|---|
| 4% | 25 years | 1,055.67 | 116,703.00 |
| 4% | 30 years | 954.83 | 143,739.38 |
| 5% | 25 years | 1,169.18 | 150,754.02 |
| 5% | 30 years | 1,073.64 | 186,513.24 |
| 6% | 25 years | 1,288.60 | 186,582.07 |
| 6% | 30 years | 1,199.10 | 231,677.04 |
A longer term lowers the payment but costs far more interest over the years. At 5% over 25 years, an extra 100 a month pays the loan off 3 years 6 months sooner and saves 24,505.40 in interest.
Repayment or interest only
With interest only you pay just the interest each month, 833.33 on 200,000 at 5%, but still owe the whole 200,000 at the end of the term, to be repaid from savings, investments or the sale of the home. Over 25 years that costs 249,999.00 in interest, against 249,999.00 for a repayment mortgage. Overpayments on an interest-only mortgage reduce the amount owed at the end.
Loan to value
The amount borrowed as a share of the price is the loan to value (LTV). A 60,000 deposit on a 300,000 home is a 20% deposit and an 80% LTV. Lenders usually offer lower rates at lower LTVs, so a bigger deposit can cut both the loan and the rate.
How to read the result
- Monthly payment: what you pay each month for the whole term (or, interest only, the interest alone).
- Total interest: everything the loan costs on top of what you borrowed; the bar shows the two side by side.
- Interest saved by overpaying: for example, on 240,000 at 4.5% over 25 years an extra 200 a month saves 38,076.22 and 5 years 3 months.
- The schedule: each month split into interest and what comes off the balance.
Common mistakes
- Using the price as the loan: the deposit comes off first, and the loan to value shows the share you borrow.
- Comparing deals by the rate alone: arrangement fees and how long a fixed rate lasts change the real cost.
- Overpaying more than your lender allows without a charge: check your offer’s limit.
How to use it
- Type the home’s price and your deposit, or put the whole loan in Home price and leave the deposit empty.
- Type the yearly interest rate from your lender’s offer and the term in years.
- Add an extra monthly amount or a one-off payment to see the interest and time they save.
- Open the schedule to see every payment, copy it, or open it as a spreadsheet.
Questions
How much interest will I pay on my mortgage?
Type your numbers and the calculator shows the total interest over the whole term, and how it splits each year in the schedule. On 200,000 at 5% over 25 years it is 249,999.00.
Do overpayments really save that much?
Yes, because every extra pound or dollar comes straight off the balance, so it stops being charged interest for the rest of the term. Many lenders limit penalty-free overpayments, often to about 10% of the balance a year on a fixed rate, so check your terms.
Why is my lender’s figure slightly different?
Lenders round at different moments, some charge interest daily, and product fees added to the loan change the total. This calculator charges a twelfth of the yearly rate each month, as most repayment mortgages are set out.
Does it include tax, insurance or fees?
No. It covers the loan itself. Property taxes, insurance and arrangement fees are extra and differ from place to place.
More calculators
Elsewhere on Yuzool
- Loan and mortgage spreadsheet in Gridwork
- Budget to plan around the payment
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