What is the difference between a repayment mortgage and interest-only?

With a repayment mortgage, each payment covers both interest and a portion of the capital, so the debt is fully paid off at the end of the term. With interest-only, payments cover only the interest — the original loan amount remains outstanding and must be repaid in full at the end. Most residential mortgages in the UK are repayment type.

How does the deposit size affect my mortgage rate?

Larger deposits unlock better interest rates because they reduce the lender's risk. At 95% LTV (5% deposit) you might pay 5.5%; at 80% LTV (20% deposit) you might get 4.2%; at 60% LTV you could access rates below 4%. The rate difference significantly affects your total interest paid over the full term.

Should I choose a 2-year or 5-year fixed rate?

2-year fixes offer lower initial rates and more flexibility — ideal if you expect to move or remortgage soon. 5-year fixes provide longer payment certainty and can save money if rates rise. Check the total cost (including any early repayment charges) across your planned holding period rather than just the headline rate.

What is the maximum mortgage I can borrow?

UK lenders typically offer 4–4.5× your annual income, with stricter caps for higher-risk borrowers. The Bank of England's FPC recommends lenders limit mortgages above 4.5× income to no more than 15% of new lending. Lenders also assess affordability based on your outgoings, credit history, and whether you could afford payments if rates rose by 3%.

How to Use a Mortgage Calculator Correctly

Buying a home is the biggest financial decision most people ever make, yet many buyers enter mortgage negotiations without fully understanding what they're committing to. A mortgage calculator is an essential planning tool — but only if you know which numbers to enter and how to interpret the results. This guide walks you through every field, common mistakes to avoid, and how to use the output to make smarter property decisions.

The Basic Mortgage Formula

A standard repayment mortgage uses this formula to calculate monthly payments:

M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]

M = Monthly payment
P = Principal (loan amount)
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (term in years × 12)

Our calculator handles this maths for you — but understanding the formula helps you grasp why small changes in interest rate have such a large impact on total cost.

Key Inputs Explained

Property Price

Enter the full asking or agreed price of the property. This is the starting point for all other calculations.

Deposit

Your deposit is the amount you're paying upfront. Enter it as either a cash amount or a percentage. The minimum deposit in the UK is typically 5% (for a Help to Buy or 95% LTV mortgage), though better rates are available at 10%, 15%, and 25% deposits.

Loan Amount (Mortgage Size)

This is simply: Property Price − Deposit. On a £300,000 property with a £60,000 (20%) deposit, your mortgage is £240,000.

Loan-to-Value (LTV) Ratio

LTV is the loan as a percentage of the property value. A £240,000 mortgage on a £300,000 property = 80% LTV. This matters because:

Lower LTV = better interest rates (less risk for the lender)
Above 90% LTV often means higher rates and limited product choice
Below 60% LTV typically unlocks the very best mortgage deals

Interest Rate

Enter the annual interest rate. For a fixed-rate mortgage, use the product rate (e.g. 4.5%). For a variable mortgage, use the current rate but be aware payments can change. Don't enter the APR — use the nominal rate shown in the product details.

Mortgage Term

The repayment period, typically 25 years in the UK. Longer terms mean lower monthly payments but significantly more total interest paid. Compare:

Term	Monthly Payment (£200k at 4.5%)	Total Interest Paid
20 years	£1,265	£103,500
25 years	£1,111	£133,300
30 years	£1,013	£164,700
35 years	£946	£197,500

The difference between a 25-year and 30-year term is only £98/month — but it costs an extra £31,400 in interest over the life of the mortgage.

Repayment vs Interest-Only

Repayment mortgage: Each payment covers both interest and a portion of the capital. By the end of the term, the mortgage is fully paid off. This is the most common type.

Interest-only mortgage: Payments cover only the interest. The capital remains unchanged throughout and must be repaid in full at the end of the term. Monthly payments are much lower, but you need a credible repayment strategy. Mostly used by buy-to-let landlords.

What the Calculator Doesn't Include

A standard mortgage calculator shows principal and interest only. Remember to budget separately for:

Stamp Duty Land Tax (SDLT): In England — 0% on the first £250,000 (first-time buyers get relief up to £425,000), then 5% up to £925,000, and higher bands above that.
Arrangement fees: Many fixed-rate products charge £1,000–£2,000 upfront. Factor this into your comparison.
Buildings insurance: Required by all mortgage lenders.
Solicitor/conveyancing fees: Typically £1,000–£2,000.
Survey costs: £400–£1,500 depending on type.
Ongoing maintenance: Budget 1–2% of property value annually for maintenance and repairs.

How to Compare Mortgage Deals Effectively

Don't just compare headline rates. The true cost of a mortgage includes arrangement fees. Use this calculation:

True annual cost = (Total interest over fixed period) + Arrangement fee, divided by fixed period years

A 4.2% rate with a £2,000 fee may cost more over 2 years than a 4.5% rate with no fee, depending on your loan size. Run both scenarios through the calculator and compare total cost, not just monthly payments.

Overpayment Strategy

Most mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Even overpaying £100/month on a £200,000 mortgage at 4.5% over 25 years saves approximately £15,000 in interest and cuts 2.5 years off the term. Use the overpayment feature in our calculator to model this.

Summary

Use a mortgage calculator by entering the loan amount (property price minus deposit), annual interest rate (not APR), and term in years. Compare total interest paid — not just monthly payments — when evaluating different terms and deals. Don't forget stamp duty, fees, and insurance in your total budget. And if you can afford even modest overpayments, the long-term savings are substantial.