Use this tool to quickly estimate your potential monthly mortgage repayments in the UK.
UK Residential Mortgage Repayment Calculator
Estimated Monthly Payment:
This excludes fees, charges, and insurance.
Mortgage Repayment Formula (UK Standard)
The standard formula to calculate the fixed monthly payment (M) on a principal loan amount (P) is:
M = P [ i * (1 + i)^k / ((1 + i)^k - 1) ]
Where:
- M = Monthly Repayment
- P = Principal Loan Amount
- r = Annual Interest Rate (as a decimal, e.g., 4.5% = 0.045)
- n = Loan Term in Years
- i = Monthly Interest Rate (r / 12)
- k = Total Number of Payments (n * 12)
Formula Source: Bank of England Financial Education Portal, Money Helper (UK Government-backed)
Variables Explained
- Loan Amount (£): The total amount borrowed from the lender. This is the house price minus your deposit.
- Annual Interest Rate (%): The yearly rate charged by the lender. The monthly payment calculation uses the monthly equivalent of this rate.
- Loan Term (Years): The duration over which you plan to pay back the loan, typically 25 years in the UK, but commonly ranges from 5 to 40 years.
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- Stamp Duty Land Tax Calculator
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- Mortgage Overpayment Savings Calculator
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What is a Mortgage Calculator UK?
A UK mortgage calculator is an essential online tool designed to help prospective and current homeowners estimate their monthly repayment costs. In the UK, mortgages typically use the capital repayment method, meaning a portion of your monthly payment covers the interest charged, and the remainder reduces the principal loan amount. This calculator simplifies the complex process of applying the compounding interest formula over the life of the loan.
Understanding your estimated monthly payment is the first critical step in the home-buying process. It helps you determine affordability, compare different loan scenarios (e.g., 20-year vs. 30-year term), and prepare for the financial commitment of homeownership. Always remember that this tool provides an estimate; the final payment may vary based on your lender’s specific fees and insurance requirements.
How to Calculate Monthly Repayment (Step-by-Step Example)
- Determine the Loan Variables:
- Principal Loan Amount (P): £200,000
- Annual Interest Rate (r): 5.0%
- Loan Term (n): 25 years
- Calculate the Monthly Interest Rate (i): Convert the annual percentage rate to a monthly decimal rate: $i = (5.0 / 100) / 12 = 0.0041667$.
- Calculate the Total Number of Payments (k): Multiply the term by 12: $k = 25 \text{ years} \times 12 = 300 \text{ payments}$.
- Apply the Formula: Substitute P, i, and k into the formula: $M = 200,000 \left[ \frac{0.0041667 (1+0.0041667)^{300}}{(1+0.0041667)^{300} – 1} \right]$.
- Final Result: The calculation yields an estimated monthly repayment of £1,169.11.
Frequently Asked Questions (FAQ)
What is the difference between a repayment and interest-only mortgage?
A repayment mortgage pays off the interest and the capital over the term, ensuring the debt is cleared. An interest-only mortgage only covers the interest, meaning the borrower must find a separate way to repay the original loan amount (the capital) at the end of the term.
Do I need to include Stamp Duty in the Loan Amount?
No, Stamp Duty Land Tax (SDLT) is a tax paid upfront and is separate from the mortgage loan. The ‘Loan Amount’ is strictly the funds borrowed from the bank to purchase the property.
What is the typical UK mortgage term?
The most common term is 25 years, but 30-year terms are increasingly popular, especially for first-time buyers seeking lower monthly payments.
Does this calculator include fees?
No. This calculator provides the principal and interest payment. It does not include arrangement fees, valuation fees, or mandatory buildings insurance, which should be budgeted for separately.