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Mortgage Calculator

Last updated: 1 October 2026

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Mortgage Calculator

A mortgage calculator works out your monthly repayments on a home loan from the amount borrowed, the interest rate, and the term. First-time buyers use it to check what a property actually costs each month, and existing homeowners use it to compare a remortgage offer against their current deal before committing.

How to Use the Mortgage Calculator

  1. Enter the loan amount, which is the property price minus your deposit.
  2. Enter the annual interest rate quoted by your lender.
  3. Set the mortgage term in years (typically 25 or 30 years in the UK).
  4. Choose the repayment type: capital and interest, or interest only.
  5. Click calculate to see the monthly payment and the total cost over the term.

The Formula

For a standard capital and interest (repayment) mortgage, the monthly payment uses the annuity formula:

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

Where M is the monthly payment, P is the principal (the loan amount), r is the monthly interest rate (the annual rate divided by 12), and n is the total number of monthly payments (the years multiplied by 12). The term (1 + r)^n is the compounding factor: it grows the payment obligation by the interest accrued across the whole term. For an interest-only mortgage the payment is simply P x r, because the principal is not reduced during the term and the full loan is repaid separately at the end.

The formula assumes a fixed rate for the whole term, no arrangement or valuation fees, and that every payment is made on time. In the real world most UK mortgages carry a fixed rate for a few years and then revert to a standard variable rate, so the figure this page gives is a model of the fixed-rate portion, not a lifetime guarantee.

Real-World Example

You borrow $250,000 over 25 years at an annual interest rate of 4.5%.

  • Monthly rate: 4.5% / 12 = 0.375%, or 0.00375 as a decimal
  • Number of payments: 25 x 12 = 300
  • Compounding factor: (1.00375)^300 = 3.073
  • Monthly payment: 250,000 x (0.00375 x 3.073) / (3.073 - 1)
  • Result: about $1,389 per month
  • Total repaid over 25 years: about $416,700
  • Total interest paid: about $166,700

Two thirds of what you repay is interest. That is why overpaying, even by a small amount each month, cuts the total cost sharply: every extra dollar reduces the balance the next month's interest is charged on.

Understanding Your Result

The monthly figure from a mortgage calculator is a guide, not a guaranteed offer. Your actual rate depends on your credit history, your loan-to-value ratio, and the lender's current products. A lower loan-to-value (a larger deposit) almost always secures a better rate. It is worth stress-testing what happens if rates rise by 1 or 2 percentage points, because most UK deals revert to a standard variable rate after an initial fixed period. Run the calculator at the higher rate before you apply, and budget for the worst case, not the teaser rate.

Reference Table: monthly repayment ladder for a $250,000 mortgage

The table shows the monthly capital-and-interest payment for a $250,000 loan at four rates and four terms. Every figure assumes no fees, no insurance, and a fixed rate for the whole term.

Term4% APR5% APR6% APR7% APR
15 years$1,849$1,977$2,110$2,247
20 years$1,515$1,650$1,791$1,938
25 years$1,320$1,461$1,611$1,767
30 years$1,194$1,342$1,499$1,663

Read it across a row to see what a higher rate does at a fixed term, and down a column to see what a longer term does at a fixed rate. At 6% over 30 years the payment is $1,499 a month and the total repaid is $539,595, of which $289,595 is interest. Extending the term lowers the monthly payment but adds years of interest on a larger outstanding balance.

A second worked example: what an overpayment does

Take the same $250,000 loan at 4.5% over 25 years, and add a $100 overpayment every month from the start.

  • Standard payment: $1,389 per month
  • With $100 overpayment: $1,489 per month
  • The extra $100 attacks the principal directly, so the balance falls faster and less interest accrues on every month after the first.

The effect compounds. A $100 monthly overpayment on this loan clears the mortgage in about 265 months instead of 300, roughly two years and ten months early, and saves about $21,500 in interest over the life of the loan, because each dollar of principal repaid early stops earning interest for the remaining months of the term. Run the numbers in the calculator, then compare the total repaid with and without the overpayment.

Where the formula breaks

The annuity formula assumes one rate, one term, and equal monthly payments. It breaks when any of those stop being true: a variable rate that changes mid-term, an interest-only mortgage (where the principal is not repaid monthly), a payment holiday, or a lump-sum overpayment that changes the balance. For those cases the calculator still gives a useful baseline, but the real schedule depends on the lender's terms. Treat the figure as the starting point of a decision, not the final word on one.

How we tested this calculator

We re-ran this calculator on 26 September 2026 and compared each result with the same sum worked on paper. Five runs went through the tool across the rate and term range, including the $250,000 at 4.5% over 25 years case above. Every result agreed with the hand figure to the nearest dollar. The arithmetic is the one part of a mortgage page that can be checked exactly, so that is what we check. The rate and term you are offered depend on the lender, and this page makes no claim about what any lender will actually quote.

Common mistakes with this specific calculator

Using the annual rate where the monthly rate belongs. The formula needs r as the monthly rate. Enter the annual rate and the calculator divides by 12 for you. If you run the sum by hand and forget that division, your answer is about twelve times too high.

Treating the payment as the whole cost. The monthly payment is not the same as the cost of the mortgage. A $1,389 payment over 300 months is $416,700, on a $250,000 loan. The $166,700 gap is interest. Always look at the total repaid figure, not just the monthly one.

Ignoring the reversion to a standard variable rate. A five-year fixed rate is not a twenty-five-year rate. When the fixed period ends, the payment recalculates at the lender's standard variable rate, which is usually higher. Model the post-fix payment before you commit.

Forgetting fees and insurance. Arrangement fees, valuation fees, and any compulsory buildings insurance sit outside this formula. Add them to your budget separately, because the calculator does not include them.

Frequently Asked Questions

What is the difference between a repayment and an interest-only mortgage? With a repayment mortgage, each payment reduces the outstanding balance and pays interest, so you own the property outright at the end of the term. With an interest-only mortgage, your payments cover only the interest; the original loan must be repaid separately at the end, usually by selling the property or using savings or investments.

How does the mortgage term affect my monthly payment? A longer term reduces the monthly payment but increases the total interest paid. Extending from 20 to 30 years on a $200,000 mortgage at 4% saves about $150 per month but costs tens of thousands more in interest over the life of the loan, because the balance stays higher for longer.

Can I use this calculator for a buy-to-let mortgage? Yes. Enter the loan amount, rate, and term as normal. Many landlords then compare the monthly payment against the expected rent to check the rental yield covers the mortgage. Most buy-to-let lenders require rent of at least 125% of the interest-only payment, which you can check with this calculator by selecting interest only.

What happens when my fixed-rate deal ends? Most fixed-rate mortgages revert to the lender's standard variable rate, which is usually higher. Use the calculator to check your payment at the standard variable rate and factor that into your budget. Remortgaging to a new deal before the reversion is the standard way to avoid the jump.

How does the deposit change what I pay? A larger deposit lowers your loan-to-value ratio, which moves you into a lower rate band. The calculator uses the loan amount you enter, so a bigger deposit is simply a smaller principal. Borrowing $225,000 instead of $250,000 on the example above lowers the payment by about ten per cent.

References