How mortgage repayments are calculated
A repayment mortgage uses a fixed monthly payment that clears the loan exactly by the end of the term. Each month:
- Interest is charged on what you still owe: balance × annual rate ÷ 12.
- The rest of your payment reduces the capital.
- Next month’s interest is a little lower, so a little more goes to capital, and so on.
The formula for the payment is the standard annuity formula, P × r ÷ (1 − (1 + r)⁻ⁿ), where P is the loan, r the monthly rate and n the number of months.
Worked example: £200,000 at 4.5% over 25 years
| Item | Amount |
|---|---|
| Monthly payment | £1,111.66 |
| Interest in year 1 | £8,909 |
| Capital repaid in year 1 | £4,431 |
| Total interest over 25 years | £133,501 |
| Total repaid | £333,501 |
In the first year about 67% of what you pay is interest. That’s why overpaying early in the mortgage saves the most. See the overpayment calculator.
Term length: lower payments, much more interest
Stretching the same loan to 30 years drops the payment to £1,013.37, but total interest rises to £164,814. That’s £31,313 more. A longer term can help affordability, but it’s an expensive way to lower your payment. If your lender allows overpayments, a longer term with planned overpayments gives you flexibility without locking in the extra cost.
When your fixed rate ends
Most UK mortgages start on a fixed rate for two or five years, then revert to the lender’s standard variable rate (SVR). Turn on Fixed rate then reversion to model it. On our £200,000 example, a 2-year fix at 4.5% reverting to a 7.25% SVR would see the payment rise from £1,111.66 to £1,423.57 a month.
That’s why most borrowers remortgage or take a product transfer before the fix ends. The remortgage calculator compares deals by their true cost, including fees.
Reading the amortisation schedule
Switch the schedule between yearly and monthly views. For each period you’ll see:
- Paid: your total payments
- Interest: the cost of borrowing
- Capital: the part that reduces your debt
- Balance: what you still owe at the end of the period
Download it as CSV to open in Excel, Numbers or Google Sheets, or use Print / PDF for a clean copy to keep with your mortgage documents.
Interest-only mortgages
On an interest-only mortgage your monthly payment covers just the interest. On £200,000 at 4.5% that’s £750 a month, and you still owe the full £200,000 at the end. Lenders require a credible plan to repay, such as investments, sale of another property, or downsizing. Interest-only is now mostly used for buy-to-let and by borrowers with substantial assets.
Using today’s rates
The rate field is pre-filled with the latest Bank of England average for a 2-year fixed rate at 75% LTV, with its date shown underneath. Your actual rate depends on your deposit, credit history and the lender, so change it to match the deals you’re considering.
Limits of this calculator
We use monthly interest with penny rounding, the standard approach for UK illustrations. Lenders that calculate interest daily, or charge payments on a different date, can differ by a few pence a month. Product fees, if added to the loan, increase the balance. Add them to the price to include them.
Frequently asked questions
How much is a £200,000 mortgage per month?
At 4.5% over 25 years, £1,111.66 a month on a repayment basis. At 5.5% it's £1,228.17. Over 30 years at 4.5% it falls to £1,013.37, but you pay about £31,300 more interest in total.
What is an amortisation schedule?
A month-by-month table showing how each payment splits between interest and capital, and the balance left afterwards. Early payments are mostly interest; by the end they're mostly capital.
What happens when my fixed rate ends?
Unless you switch, you move to the lender's standard variable rate (SVR), which is usually much higher. Turn on 'Fixed rate then reversion' to see the payment jump and the balance you'll owe when the fix ends.
Repayment or interest-only?
With repayment you clear the debt by the end of the term. With interest-only you pay only the interest and still owe the full loan at the end, so you need a credible repayment plan — lenders insist on one.
How is the monthly interest calculated?
We use the standard UK method: the annual rate divided by 12, applied to the outstanding balance each month, rounded to the penny. The final payment absorbs any rounding so the loan ends at exactly £0. Some lenders calculate interest daily, which can differ by a few pence.
How much is a £250,000 mortgage per month?
At 5% over 25 years, about £1,461 a month on a repayment basis. Enter your own rate and term above.
Sources
Results are estimates for education and planning, not financial advice. They depend on the figures you enter and the assumptions shown above.