Mortgage amount
Principal = property value − cash depositThe result cannot fall below zero. The deposit must not exceed the entered property value.
Mortgage Calculator · Methodology
How the calculation works
Estimate the payment and full-term cost of a repayment or interest-only mortgage, then show how rate and term choices change the result.
Return to calculatorIncluded
- Property value and cash deposit
- Mortgage amount and loan-to-value
- Repayment and interest-only methods
- Monthly payment
- Total interest at a constant rate
- Annual balance and payment composition
- A user-entered rate-change scenario
- Five-year shorter and longer term comparisons for repayment mortgages
Outside this method
- Mortgage eligibility or affordability assessment
- Product recommendations or live mortgage rates
- Initial deals followed by variable rates
- Product, broker, legal and valuation fees
- Overpayments and early-repayment charges
- Offset, part-and-part and flexible mortgages
- Property-price changes and future loan-to-value
- A repayment vehicle for interest-only capital
Calculation
Core formulas
Loan-to-value
LTV = mortgage principal ÷ property valueThis uses the user-entered property value rather than a lender valuation.
Repayment mortgage payment
Payment = P × r ÷ [1 − (1 + r)⁻ⁿ]P is principal, r is the monthly interest rate and n is the number of monthly payments.
Interest-only payment
Payment = mortgage balance × annual rate ÷ 12The payment covers modelled interest but does not reduce the mortgage capital.
Monthly repayment balance
Bₘ = Bₘ₋₁ + interestₘ − capital repaymentₘInterest is calculated first and the remainder of the constant payment reduces capital.
Rate-change comparison
Payment shock = payment at comparison rate − payment at starting rateBoth rates are applied separately for the full selected term to isolate their effect.
Timing convention
When cash flows occur
The property and deposit establish the mortgage at the start. Interest is calculated monthly on the opening mortgage balance and the monthly payment is then applied. Annual chart values aggregate 12 monthly calculations. Each rate scenario holds one rate constant for the full term.
Limitations
What the result cannot establish
- A real mortgage commonly has an initial product period followed by a different rate, rather than one rate for the entire term.
- Lenders may calculate interest daily and use different payment dates and rounding.
- Available rates depend on loan-to-value, eligibility, product fees and market conditions.
- Interest-only borrowers need a credible way to repay the capital; the cost and risk of that plan are outside the calculation.
- The rate-change comparison is a stress scenario, not a forecast.
- Displayed whole-pound values can differ slightly from the underlying unrounded calculation.
Reference tests
Numerical checks
| Case | Inputs | Expected result |
|---|---|---|
| Standard repayment mortgage | £250,000 mortgage; 4.5% rate; 25-year term | Approximately £1,389.58 a month and £166,874 total interest |
| Interest-only mortgage | £250,000 mortgage; 4.5% rate; 25-year term | £937.50 a month, £281,250 interest and £250,000 capital remaining |
| Zero-rate repayment | £120,000 mortgage; 0% rate; 10-year term | £1,000 a month, £0 interest and £0 capital remaining |
Evidence