How Mortgage Repayments Are Calculated

Mortgage repayments don’t need to be complicated. Read through this comprehensive guide to learn how they work, understand the factors that shape them, and find out how to tally up yours using our handy calculator tool.

How are mortgage repayments calculated?

When you take out a mortgage, you agree to repay the debt over an agreed term, typically 25 years but sometimes longer or shorter than this. In addition to these debt repayments, you will also be charged interest, which is based on a percentage of the mortgage balance.

Whether you make your debt repayments monthly or at the end of the term will depend on what type of mortgage you have. There are three different repayment types:

Capital repayment: You will make your debt repayments monthly along with an interest payment based on a percentage of the outstanding balance. 

Interest-only mortgage: You are only required to repay the interest each month and settle the debt itself at the end of the term using a pre-agreed repayment vehicle.

Part-and-part mortgage: This is a middle ground between options 1 and 2, where a portion of the mortgage is capital and repayment and the rest interest-only. This means you will make some debt repayments during the term, but may have outstanding debt left over at the end of the agreement, unless you can make optional overpayments.

In summary, your monthly mortgage payments will be based on the mortgage amount, term length, interest rate and the repayment type you choose.

Mortgage repayment calculator

You can use our calculator below to work out what your mortgage repayments will look like based on the amount you’re borrowing, the term length and the interest rate.

There is also an option to toggle between capital repayment and interest-only. If you are interested in a part-and-part mortgage, you will need to do two separate calculations.

Now that you’ve run your calculations, you can source a mortgage with us and access whole-of-market broker support to ensure you get the best deal - get started here.

What factors will determine your mortgage payments?

Here we will take a closer look at the factors that determine mortgage repayments, and how they can vary, to give you a clearer idea of the kind of deal you could end up with.

• Mortgage amount: The amount you can borrow is usually based on 4.5 times your annual income, although it can sometimes be higher depending on the lender you choose. This amount is repaid over the course of the agreed term with monthly interest.
• Term length: Taking out a capital repayment mortgage across a longer term means lower monthly payments as the debt is spread over a wider period, but you will also pay more in interest overall due to having to make a greater number of payments to make.
• Interest rate: The rate you end up with will determine how much your interest payments will be. Mortgage lenders will decide what rate to offer you based on the amount of deposit you have, your credit history and the current market conditions.
• Repayment type: Interest-only mortgages have lower payments as only the interest needs to be paid each month. Capital repayment agreements have higher ones due to the deby repayments, while part-and-part is a middle ground between the two.
• Product type: The mortgage product type will determine how your interest is charged. The two main types are fixed-rate and tracker. With a fixed-rate mortgage, you will pay a lower introductory rate for a set period (usually 2-5 years) before reverting to the lender’s standard variable rate. With a tracker mortgage, your rate is tied to an external marker, usually the Bank of England’s base rate, and can move up or down in line with it.

Example calculations

The tables below illustrate how mortgage repayments on a capital repayment agreement can vary based on the main factors discussed above.

Repayments based on term length

The data below is based on an example mortgage amount of £190,000, close to the average residential mortgage amount in the UK at the time of writing (December 2024). We have used an interest rate of 4%, which is also representative of the current market conditions.

Repayments based on interest rates

Sticking with the example mortgage amount of £190,000, this table shows how repayments can vary based on the interest rate. We have used an example term length of 25 years.

Repayments based on mortgage amount

The table below shows how the repayments compare across different mortgage amounts, with a standard 25-year term length and an example interest rate of 4%.

Click on any of the mortgage amounts in the table above to access more information about the repayments on a home finance loan of this size.

Interest-only mortgage repayments

The table below shows examples of interest-only mortgage repayments based on a loan amount of £190,000 and a term length of the standard 25 years.

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Other costs and fees

To get a clear idea of what your mortgage will cost over all, there are other fees you should factor in. The main ones are as follows:

• Product fees: Can range between nothing and £2,000. Fee-free deals often come with higher rates, but the fee itself can sometimes be added to the mortgage.
• Valuation fee: Some lenders will expect you to foot the cost of having the property you’re buying valued, and this can set you back between £250-1,500.
• Legal fees: Can range from a few hundred to several thousand pounds.
• Stamp duty: See our stamp duty guide to find out how much your bill will be and whether you qualify for exemption.
• Admin costs: This includes the booking fee, telegraphic transfer fee and the account fee. All in all, admin costs for a mortgage application can cost around £1,000.

Tips to help you lower your mortgage repayments

You can potentially reduce your mortgage repayments by doing the following:

• Put down a larger deposit: Not only would you need to borrow less, putting down extra deposit can reduce the loan-to-value (LTV) ratio and help you qualify for a lower rate.
• Improve your credit situation: Waiting for any bad credit to disappear from your credit files, paying off debts you’re in a position to clear, and paying any existing bills and credit agreements on time ahead of your application can also help you land a lower rate.
• Consider a longer mortgage term: This will reduce your monthly payments in the short term (on a capital repayment agreement), but you will be paying more in interest overall. 
• Consider interest-only: Interest-only mortgages have lower monthly payments but you will need a repayment vehicle to settle the debt at the end of the term. Be sure to seek professional advice from a qualified mortgage broker before choosing this option.

Why choose Teito for your mortgage needs?

After you have run your calculations to work out roughly how much your mortgage will cost, the next step is to choose your own mortgage deal with us online. You can pick a mortgage that fits your needs in minutes, and we have expert brokers on hand to help you along the way.

Here are some of the other benefits of choosing Teito:

• You can access exclusive rates and deals online
• Our brokers are whole-of-market and 5-star rated
• We can secure an agreement in principle for you in minutes
• Our brokers can boost your chances of mortgage approval

Ready to source your mortgage and access expert advice from a whole-of-market broker? Fill out our form to get started with a free, no-obligation chat.