Mortgage calculator: how to calculate mortgage repayments

With our free and easy to use mortgage payment calculator, you can get an estimate of how much you can afford to borrow to buy a home. Calculate your potential mortgage, learn the costs involved in monthly mortgage repayments and discover how to reduce your expenses.

John Ellmore Last updated on 06 July 2021.
Mortgage calculator: how to calculate mortgage repayments

Use our mortgage calculator to work out how large a mortgage you can afford, whether you’re a first-time buyer or you’re remortgaging. With our simple, free calculator you can just enter a few details and you’ll be one step closer to your dream home.

We’ll explain how much you can borrow, taking into account your salary and savings, and outline how the length of your mortgage term will affect the cost of your mortgage. These are some of the essential things you need to know before applying for a mortgage.

We’ll also give a brief overview of the different types of mortgages and discuss which choice may be best for your financial circumstances.

So, calculate your potential mortgage repayments now.

How can a mortgage calculator help me?

By entering your salary and the deposit you can put down for a mortgage, you can calculate how much you could borrow. When you know how much you might be able to borrow, you can start comparing mortgages which suit your circumstances.

How much can I borrow with my salary?

Typically mortgage providers are willing to lend between four and five times a mortgage applicant’s salary; this is sometimes referred to as the mortgage salary multiple. Add your deposit to this sum and you’ll get an approximation of what you can borrow to buy a home.

As an example, if you earn £30,000 a year, you might be able to borrow up to £150,000 from a mortgage provider. If you have savings of £20,000 for a deposit, you could get a mortgage on a £170,000 property.

Read our guide on how much you could borrow for a mortgage deposit to find out more.

How do I calculate my mortgage payment?

There are many factors that will affect the amount that you can borrow, and most mortgage lenders will examine your individual financial situation in some detail before they come to a decision.

Based on your income, using a mortgage calculator will give you a guide as to how much your mortgage payments will be.

By entering your salary, and those of the other mortgage applicants’ – if you plan to apply for a joint mortgage – plus the amount of savings you are able to put forward as a deposit, you can calculate an estimate of how much you can borrow with a mortgage.

What costs are included in my monthly mortgage payment?

The costs involved in a mortgage payment vary depending on the type of mortgage you take out. We discuss a couple of the different mortgage payments below.

On an interest-only mortgage, monthly repayments will be made up of only the interest accrued during the mortgage term. The capital borrowed will be repaid at the end of the mortgage term.

A repayment mortgage is when you repay both the capital and the interest each month which clears the entire balance at the end of the mortgage term.

With some mortgages you’ll repay the same amount each month, these are known as fixed rate mortgages — 2 year fixed rate mortgages and 5 year fixed rate mortgages are particularly common. You’ll typically pay the same amount each month for a period of between two to five years and occasionally up to ten. During the fixed rate period you’ll pay the same amount even if the lender's interest rates changes during that time. When the fixed rate period is over your interest rates will revert to the lender’s standard variable rate.

A tracker mortgage will be based on the Bank of England’s base rate, which can fluctuate at any time, this means you might pay more some months and less during others.

How do I reduce my monthly mortgage payments?

There are many ways you can reduce your monthly mortgage costs if you find the amount you just calculated is too high for you to afford.

One of the simplest ways is to opt for a longer repayment term; this will immediately reduce the amount you pay each month. However, think carefully before doing this as it won’t reduce the total amount you pay over the loan’s term. Instead it will mean you end up paying more because of the extra interest you’ll be paying on the additional months or years added to your mortgage.

If you already have a mortgage you can remortgage. You could see if you can remortgage to a cheaper deal, or extend your loan term to make your monthly payments more manageable, allowing you to pay for other expenses and live more comfortably. Remember, extending your loan term will mean you pay more in total.

Also, putting together a larger deposit will reduce the monthly payments you have to pay. If you want to lower the financial impact of your mortgage repayments, why not wait a few years to save up a larger deposit?

An interest-only mortgage means your monthly repayments are smaller than they would be for a standard repayment mortgage, as you are only paying the interest on the amount you borrow. At the end of the mortgage term you’ll then pay off the initial capital you borrowed. Most interest-only mortgage holders do this using the proceeds from their property sale, although this comes with a risk as the property may have fallen in value.

Interest-only mortgages are harder to achieve and often will only be available on lower loan to value mortgages. Lenders may stipulate proof of another form of investment that matures at the end of the mortgage term providing funds to clear the debt.

Can my monthly mortgage payments go up?

Depending on the mortgage product you take out, yes your monthly mortgage payments can go up. Your repayments may rise if you take out a standard variable rate or tracker mortgage.

If you decide to take out a variable rate mortgage you’ll be subject to paying higher levels of interest if the Bank of England’s base rate goes up, because the rates of these mortgage products are usually set by the base rate.

However, you can also benefit from rate drops when the interest rate is cut.

Choosing a longer term fixed-rate mortgage can help avoid rate changes and give you peace of mind, to know what you are likely to be paying each month. When your fixed rate deal ends, your interest rates could rise if you don’t remortgage to a new deal, as you would automatically be put on the lender’s standard variable rate.

How to decide which mortgage you can afford

When looking to take out a loan, a useful metric to determine whether you can afford to take out that debt is the debt to income ratio (DTI) of the loan. This compares the total monthly debts of the loan – mortgage repayments, insurance, property tax – to the amount you earn on an annual basis.

43% is usually the upper limit that mortgage providers will accept. The sweet spot for borrowers (and lenders) is between 28% and 36%.

You can calculate your DTI by adding up your monthly debt payments – rent or expected mortgage payments, credit card debt, student loan debt and child support. Include the new loan too, as some providers factor this into DTI.

Compare this against your post-tax wages, taking away tax and national insurance fees. Include any income that is earned away from your main job, including freelance work, investment earnings and property earnings.

Then divide your total monthly debt by your total monthly income and multiply the resulting figure by 100.

So, for example, if your debts amount to £900 and your monthly income is £2,800 your DTI would be 32%, which would contribute well to your ability to achieve a mortgage.

Other useful mortgage calculators

About the author:

John Ellmore is a director of NerdWallet UK and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information. Read more

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