How mortgage interest is calculated
Interest is charged monthly on the balance owed at one twelfth of the annual rate. On a repayment mortgage the balance falls, so interest falls with it.
Some lenders charge interest daily or recalculate annually, which can change the figures slightly, so rely on your mortgage illustration.
Worked example
Borrowing £250,000 at 4.5% over 25 years costs £1,389.58 a month and £166,874.36 in interest in total. In the first year, £11,136.70 of your £16,674.96 in payments goes on interest.
At 5.5% instead, the total interest rises to £210,565.62. Stretching the 4.5% mortgage to 30 years lowers the payment to £1,266.71 but raises the interest to £206,016.78. On an interest-only basis, you'd pay £281,250.00 in interest over 25 years and still owe the £250,000.
Ways to pay less interest
A lower rate, a bigger deposit or a shorter term all reduce the interest you pay. Overpaying, where your deal allows it, reduces the balance faster so less interest builds up.
Most deals have an early repayment charge if you overpay more than a set amount during a fixed or discounted period, so check your terms first.
What this calculator assumes
The interest figures come from an amortisation schedule for the mortgage: equal monthly payments on one nominal rate, with each month's interest charged on the balance still owed at one twelfth of the annual rate. The calculator shows interest at one rate for the whole term, not a switch to a new rate after a deal ends.
It leaves out fees added to the loan, early repayment charges and rate changes, so the total interest is an estimate to compare options with.
Inputs for the mortgage interest calculator
Property price
The price of the home.
Deposit
What you're paying upfront. A bigger deposit means borrowing less and paying less interest.
Interest rate (per year)
The annual interest rate on your mortgage. The rate shown is only an example, so enter the rate from your quote.
Term
How many years you'll repay over. A longer term means paying interest for longer.
Repayment type
Interest only means paying just the interest, so you pay interest on the full loan for the whole term.
CALCULATOR QUESTIONS
Mortgage interest calculator questions
How much interest will I pay on my mortgage?
Enter your details above. For example, £250,000 at 4.5% over 25 years costs £166,874.36 in interest.
Why do I pay more interest at the start?
Interest is charged on the balance you owe, which is highest at the start. As you repay, the balance falls and so does the interest.
Does a longer mortgage term cost more interest?
Yes. In the example above, going from 25 to 30 years adds £39,142.42 of interest, even though the monthly payment falls.
Is interest-only more expensive?
Over the whole term, usually yes, because the balance never falls, so you pay interest on the full amount every month.