How to calculate mortgage repayments
A repayment mortgage uses an amortisation formula: each monthly payment covers the interest accrued that month plus a slice of the capital. Early on most of the payment is interest; later most of it is capital.
The rule
Monthly payment = P × r ÷ (1 − (1 + r)^−n), where r is the monthly rate and n the number of months
Do it automatically — Mortgage calculatorStep by step
- 1Take the loan amount: property price minus deposit.
- 2Convert the annual interest rate to a monthly rate by dividing by 12.
- 3Convert the term to months (25 years = 300).
- 4Apply the amortisation formula, then add stamp duty or closing costs to the upfront cash you need.
What trips people up
- • Affordability is usually capped at a multiple of income and stress-tested at a higher rate than the one you are offered.
- • Interest-only payments look cheaper but leave the full capital outstanding at the end.
Common questions
How much can I borrow?
Typically 4 to 4.5 times income, subject to deposit size and outgoings.
Does overpaying help?
Significantly — overpayments come straight off capital and can cut years off the term.
Skip the maths
Repayments, amortisation, stamp duty / closing costs and affordability.
Open the repayment, affordability, fees tool