If you’re thinking about purchasing a house you will want to know how much your mortgage payment is going to be. We have put together a handy calculator making it easy to see what your monthly payment would be and how much you can afford to borrow.
Enter the Mortgage Amount you want to borrow, how long you want to borrow for, and the interest rate you will be borrowing at. Our calculator will then show you your monthly payment amount as well as your Total Mortgage cost and Total Interest.
Remember, your Mortgage Amount is the house price minus your deposit.
How To Use The Monthly Mortgage Payment Calculator
Before you start the search for your new home, you will need to work out how much of a mortgage you can afford.
You want to ensure that your monthly mortgage payments are going to be affordable even if interest rates continue to rise.
The mortgage amount box is how much you are going to borrow. This is the house price minus your deposit.
The mortgage period is how many years you plan to take the mortgage over. 25-30 years is the most popular range but more people are opting for even longer mortgages such as 35 & 40 years to bring monthly payments down.
Lastly, you need to add your interest rate. Everyone’s interest rate will depend on their own personal situation but you can get an idea of recent mortgage rates here.
The calculator will then provide the monthly payment for a mortgage with those figures. It will also show you the total cost of your mortgage over the complete term as well as how much of your payments go towards interest.
Feel free to play around with the numbers to figure out the mortgage that works best for you.
Monthly Mortgage Payment Formula
- r = Annual interest rate (APRC)/12 Months
- P = Principal (starting balance) of the loan
- n = number of payments in total: Mortgage term in years x 12 (Total number of months)
The formula looks like this:
What Is A Mortgage
A mortgage is a specific type of loan designed for buying property. When you take out a mortgage in the UK, you borrow money from a lender—usually a bank or building society—to purchase a home or another type of real estate.
Here’s the basic premise: you select a property you wish to buy and then borrow the required funds to pay for it. You repay the borrowed amount, along with interest, in monthly installments over an agreed period, typically 25 to 35 years. If you are unable to meet the payments, the lender has the right to repossess the property through a legal procedure known as repossession.
How Much Mortgage Can I Borrow?
As a general rule of thumb, you will be able to borrow approximately 3.5 – 4.5x your salary. If you are buying as a couple the lender will also take into account your partner’s income. In that case, it would be 3.5 – 4.5x the total of both your salaries.
If you earned £30,000 per year and your partner earned £30,000 per year, you would likely be able to get £210,000 to £270,000 depending on personal circumstances. The lender will also take into account other liabilities and outgoings you have such as car payments, credit cards, and loans.
How Much Mortgage Can I Afford?
Just because you can borrow a certain amount doesn’t mean you should. Many people try to get the biggest mortgage available to them, only to get in financial trouble down the line.
I would recommend trying to keep your mortgage payment at a maximum of 30% of after-tax income. If you can purchase a house you like at an even lower percentage of income that’s even better.
I was able to purchase my first house for £182,500 and a £420 per month mortgage. This leaves me in a very comfortable position with my finances and gives me a lot of money left over at the end of the month to invest. I could have got a much larger mortgage if I really wanted but I was happy with the house I was purchasing and having a mortgage at 50% of my rent before gives me a lot of peace of mind.
Also, now that we are seeing mortgage rates skyrocket, people who took the maximum budget they could at a 2% rate are now in a very bad position at 6 & 7% rates. When purchasing you should leave yourself a buffer so if rates skyrocket you are not at risk of losing your home.
In short, buy a house that’s affordable for your income level. Your life will be much more stress-free.
Main Types Of Mortgages Available To Home Buyers In The UK
When it comes time to buy a house, there are a number of different mortgage options available. We have outlined the main ones below but you should speak to a mortgage advisor for advice on your specific financial position.
Repayment Mortgages
With a Repayment Mortgage, you pay back a portion of the loan amount (the capital) plus the interest each month. By doing so, you’re gradually reducing the overall debt, and by the end of the term, you will have repaid the entire loan amount. It provides the security of knowing that the mortgage will be paid off in full by the end of the term, assuming all payments are made as agreed.
There are different variations of a repayment mortgage.
Fixed Rate Mortgage
A Fixed-Rate Mortgage has an interest rate that remains constant for a predetermined period, typically 2, 3, 5, or 10 years. This means your monthly payments remain the same during this time, providing certainty and stability. After the fixed period, the rate usually reverts to the lender’s Standard Variable Rate (SVR), which may result in a change in your monthly payments.
Variable Rate Mortgages
A Variable Rate Mortgage has an interest rate that can change, typically in line with the Bank of England base rate or the lender’s internal rate. This means that your monthly payments can go up or down, depending on interest rate fluctuations, making budgeting less predictable.
Interest Only Mortgages
With an Interest-Only Mortgage, your monthly payments only cover the interest on the loan, and you don’t repay any of the capital borrowed. This results in lower monthly payments but the original loan amount remains outstanding at the end of the mortgage term. You’ll need a robust plan, such as investments or other savings, to repay the capital when the term ends, or alternatively, the property may need to be sold to settle the debt.
Shared Ownership Mortgages
Shared Ownership is a scheme that allows you to buy a share of a property (typically between 25% and 75%) and pay rent on the remaining share, which is usually owned by a housing association. You secure a mortgage for the share you’re purchasing and have the option to buy more shares (a process known as staircasing) until you own 100% of the property. Shared Ownership mortgages can make it more affordable to get on the property ladder, as they require a smaller deposit and mortgage compared to buying outright. They are often a good option for first-time buyers and those who may not qualify for a mortgage on the full property value.
Lifetime Mortgages
A Lifetime Mortgage is a form of equity release available to homeowners aged 55 or over, allowing them to unlock the value in their home without having to move. The homeowner retains ownership of the property and can choose to receive the funds as a lump sum, regular income, or a combination of both. Interest is usually rolled up, meaning it accumulates over time and is added to the loan amount. The total loan amount, including the rolled-up interest, is repaid from the sale of the property, typically when the homeowner dies or moves into long-term care. It’s crucial to receive professional advice when considering a lifetime mortgage, as it can impact inheritance and tax situations.
When considering any of these mortgage types, it’s crucial to assess your financial situation, preferences, and future plans and to seek advice from a mortgage advisor or a financial counselor to find the most suitable option for your circumstances.
Final Thoughts
Our calculator has hopefully helped you calculate how much your monthly mortgage payment will be when buying your house. You should now have a good idea of how much of a mortgage you can realistically afford. If you’re about to apply for a mortgage, check out our full overview of the mortgage application process.
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