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Mortgage interest rate calculator
How will a rise or fall in interest rates affect my mortgage?
Different interest rates and mortgage terms can change your monthly mortgage repayments and the amount in interest you repay. Use this calculator to compare different mortgage scenarios.
This calculator is designed to give you a guide on mortgage costs. It also makes certain assumptions to be able to provide calculations over a longer period that will not be reflected in your own mortgage. The actual mortgage you obtain will depend on a number of factors that are specific to your own personal and financial circumstances.
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How to calculate mortgage interest
A simple way to calculate the interest on your mortgage is to:
- First, find your outstanding mortgage balance and current mortgage interest rate
- Then divide your current mortgage interest rate by 100, giving you a decimal figure.
- Now multiply your outstanding mortgage amount by the decimal figure.
- And finally, divide the number you get by 12.
The number you have calculated is the amount of interest you’ll pay on your next monthly mortgage repayment.
For example, let’s say your outstanding mortgage loan amount is £150,000 and your interest rate is 5%.
To work out how much interest you’ll pay in the coming month, the calculation is:
- 5 ÷ 100 = 0.05
- £150,000 x 0.05 = £7,500
- £7,500 ÷ 12 = £625.
So your next monthly mortgage repayment will include £625 in mortgage interest. Note that if you have a capital repayment mortgage, where some of the original mortgage is also paid back each month, your overall monthly mortgage repayment will be higher to account for this too.
With the alternative of an interest-only mortgage, you just pay the interest on your mortgage every month. However, you’ll need a plan in place to pay off your original loan amount when your mortgage ends.
» MORE: Mortgage repayment calculator
Calculating how much interest you pay on a mortgage overall
Working out how much interest you’d pay on a mortgage in total is more difficult to calculate manually yourself. This is because your outstanding mortgage decreases every month with a typical capital repayment mortgage. It’s also unlikely that you’ll pay the same interest rate for the entire duration of your mortgage.
However, a mortgage lender will still give you an estimate of the total interest payable on a given mortgage deal based on certain assumptions. Our mortgage interest calculator can give you a similar idea of how much interest you will pay.
Using the NerdWallet mortgage interest rate calculator
Our mortgage interest rate calculator can be used to compare the interest and repayments payable across different interest rates and mortgage terms. It can also be used to get an idea of how mortgage repayments may change if interest rates were to rise or fall.
The calculator is intended as a guide only and relies on certain assumptions. It is based on your mortgage rate remaining the same for the duration of your mortgage, which isn’t likely to happen. Always speak to your current mortgage lender for details of how interest rate changes might affect your mortgage repayments before comparing deals from other lenders or brokers.
Are mortgage interest rates calculated daily or monthly?
This depends on your lender and particular mortgage, so you’d need to check with them directly to confirm either way. A daily interest mortgage sees the amount of interest you’re charged recalculated each day based on your outstanding mortgage debt. So if you overpay on your mortgage, you may pay less interest due to your outstanding mortgage coming down quicker than if you have a monthly interest mortgage, where the interest you pay is calculated once a month.
What happens if interest rates rise or fall?
If interest rates rise or fall and you have a fixed-rate mortgage deal, your mortgage repayments should stay the same for as long as you’re within your initial fixed-rate period. However, if you have a tracker mortgage or are paying your lender’s standard variable rate (SVR), there’s a good chance your monthly repayments will change if interest rates change.
Mortgage repayments on these variable rate mortgages can become more expensive if interest rates rise and cheaper if they fall – though interest rate fluctuations are not always passed on immediately to borrowers. Mortgage rates generally can be influenced by a wide range of factors, including changes in the Bank of England base rate or because of varying levels of competition between lenders.
» MORE: See current mortgage rates
Useful links
- Mortgage repayment calculator
- How much can I borrow for a mortgage?
- Mortgage overpayment calculator
- Stamp duty calculator
- Buy to let mortgage calculator
- Mortgage calculators
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