How to use a mortgage calculator

6 February2021

How much could a mortgage cost you per month? What effect would the repayment term have on that cost? A mortgage calculator can answer questions like this for you - just remember that the figures you'll get are 'for illustration purposes only'. If you want a personalised quote, you should talk to a mortgage expert.

What goes in to a mortgage calculator?

With a mortgage calculator like ours, you'll have to tell it three things.

  • The size of the mortgage you're looking for
  • The length of the repayment term you're considering
  • The interest rate you think you might be offered.

Each one of those figures will have an impact on the monthly cost, for the following reasons.

Mortgage amount

The more you borrow, the more you'll have to pay back every month. Moving the first slider on our mortgage calculator will show you what kind of monthly payment you'd be looking at for different mortgage amounts.

Remember that the cost of the property isn't the only factor here - it also depends on how much of a deposit you can afford.

Putting down a larger deposit can also give you access to better deals with a lower interest rate, since your lender will be taking less of a risk lending you the money. The lender would know that they could (potentially) repossess your property if you didn't repay the money - and if you have a 40% deposit, the property's value would have to fall by more than 40% before it was worth less than the mortgage they'd lent you.

With a 10% deposit (a 90% mortgage), the risk is simply greater for the lender, since an 11% fall in house prices isn't so unlikely.

Length of mortgage term

The more rapidly you repay a mortgage, the less it'll cost in the long run, since the interest won't be building up for as long.

However, the shorter the term, the more you'll pay every month, since the amount will be spread out over a shorter period. Moving the second slider on our mortgage calculator left and right will show you what the effect of the mortgage term would be.

It's important to avoid a term that's too long (or you'll pay more than you need to) or too short (or you might struggle to make your payments). Finding the right term for you is vital: if you don't keep up with your payments on a secured debt like a mortgage, you could end up having the property repossessed.

Interest rate

Your credit rating and the size of the deposit you lay down will have a major impact on the interest rate you're offered (or whether you're actually offered a mortgage at all).

At this stage, before you've spoken to an expert, you can't know for sure what rate you'll be offered - but the third slider on our mortgage calculator will show you how the interest rate would affect the monthly payment.

What comes out of a mortgage calculator?

Our mortgage calculator gives you an indication of how much a mortgage might cost per month, based on the figures you've put in using the sliders.

You'll notice it gives you two figures:

Interest-only mortgage

Every month, your payment would go towards the interest on your mortgage. Once you've made your final payment, you'll still need to pay off the capital (the actual money you borrowed). So an interest-only mortgage costs less per month and a lot of people have taken out interest-only mortgages so they can get on the property ladder - then moved to a repayment mortgage later on, once their finances are doing better.

Repayment mortgage

Every month, a part of your payment would go towards the interest on your mortgage, and part would go towards the capital. Once you've made your final payment, your mortgage will be paid off and the house will be 100% yours.

If you have any questions about mortgages, you can talk to an expert mortgage adviser on 0800 195 2913.

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