How the Mortgage Calculator UK Calculator Works
Buying a home in the UK involves more than the monthly mortgage payment. You need a deposit, you may owe stamp duty, and you have other costs such as legal and survey fees. The Mortgage Calculator UK adds these together, so you can see what you will pay each month and how much cash you need to complete the purchase.
What you enter
- Property price and deposit: the price you will pay, and the part you put down from your own money. The rest is the mortgage.
- Interest rate and term: the yearly rate, and how many years the mortgage lasts. Terms of 25 years are common.
- Mortgage type: repayment, or interest-only.
- Who is buying: this changes the stamp duty. Choose moving home, first-time buyer, or buying an additional property.
- Other buying costs: solicitor, survey, valuation and broker or lender fees.
- Overpayment (optional): an extra amount you pay each month on a repayment mortgage.
Repayment and interest-only
With a repayment mortgage, every payment pays the interest and reduces the loan, so you own the home outright at the end of the term. The monthly payment uses the standard formula, where P is the mortgage, r is the monthly rate (the yearly rate divided by 12) and n is the number of months:
payment = P x r x (1 + r)^n / ((1 + r)^n - 1)
With an interest-only mortgage, you pay only the interest each month, so the payment is lower:
payment = P x r
But you still owe the whole loan at the end, and you must have a plan to repay it, such as savings, investments or selling the property. Lenders are strict about interest-only, so check what they accept.
Loan to value (LTV)
LTV is the mortgage as a percentage of the property price. A £297,500 mortgage on a £350,000 home is 85% LTV. A lower LTV, which means a bigger deposit, often gets you a lower interest rate.
Stamp duty
Stamp Duty Land Tax (SDLT) is a tax on buying a property in England and Northern Ireland. It is charged in bands, like income tax: each slice of the price is taxed at its own rate. The calculator uses these bands:
| Part of the price | Standard rate |
|---|---|
| Up to £125,000 | 0% |
| £125,001 to £250,000 | 2% |
| £250,001 to £925,000 | 5% |
| £925,001 to £1.5 million | 10% |
| Above £1.5 million | 12% |
First-time buyers pay 0% on the first £300,000 and 5% on the part from £300,001 to £500,000, but only if the price is £500,000 or less. Buying an additional property adds 5 percentage points to every band. Scotland and Wales have their own taxes, which this calculator does not cover. Rates and thresholds change, so check gov.uk for the current figures.
A worked example
You buy a £350,000 home with a £52,500 deposit (15%). The mortgage is £297,500 at 4.5% over 25 years, and you have £2,500 of other buying costs.
| Result | Amount |
|---|---|
| Loan to value | 85% |
| Monthly payment (repayment) | £1,653.60 |
| Total interest | £198,580 |
| Total you repay | £496,080 |
| Stamp duty (moving home) | £7,500 |
| Cash needed up front | £62,500 |
| Payment if rates rose 3 points to 7.5% | £2,198.50 |
The up-front cash is the deposit of £52,500, plus stamp duty of £7,500, plus £2,500 of costs. The same purchase by a first-time buyer would pay £2,500 in stamp duty, and by someone buying an additional property, £25,000. With an interest-only mortgage, the monthly payment would be £1,115.63, but you would still owe £297,500 at the end.
Chart: what you still owe
The repayment mortgage in the example. The bar shrinks slowly at first, because most of the early payments go on interest:
Start ████████████████████████████████████████ £297,500 Year 5 ███████████████████████████████████ £261,377 Year 10 █████████████████████████████ £216,159 Year 15 █████████████████████ £159,555 Year 20 ████████████ £88,698 Year 25 (paid off)
Overpayments
Paying extra each month reduces the loan faster, so less interest is charged. On the mortgage above, an extra £200 a month pays it off in 20 years and 7 months instead of 25, which is 53 months sooner, and saves £39,996 in interest. Many lenders limit overpayments to 10% of the balance each year without a charge, so check your terms.
Why the rate rise figure matters
Lenders test whether you could still pay if rates went up. The calculator shows the payment at 3 percentage points higher than your rate. Many people move to a new deal every 2 or 5 years, so their rate can change. It is a good idea to check you could manage the higher payment.
What this calculator does not include
- Building and contents insurance, council tax, ground rent, service charges and maintenance.
- Scottish (LBTT) and Welsh (LTT) property taxes.
- Changes in your rate after an introductory deal ends. The calculator uses one rate for the whole term.
- Early repayment charges, and the fees for arranging a mortgage, unless you include them in the buying costs.
This tool gives an estimate for general information only. It is not financial or mortgage advice. Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it. Speak to a qualified mortgage adviser before you borrow.