Budget & housing
Mortgage Repayments Explained: How They're Worked Out
How UK mortgage repayments are calculated — capital vs interest, what changes your monthly payment, and a worked example at 4.5% over 25 years.
Updated July 2026 · 9 min read
General information only — not financial, legal or tax advice. Rates and rules change; check GOV.UK or official resources before making decisions.
Key takeaways
- On a standard repayment mortgage, each monthly payment covers interest plus some of the outstanding balance — so the loan reaches zero by the end of the term.
- Your payment depends on three inputs: how much you borrow, the interest rate, and the term in years.
- A £200,000 mortgage at 4.5% over 25 years costs about £1,112 a month, with roughly £133,000 of interest over the full term.
- Early payments are mostly interest; later payments clear more capital. That is why overpaying early saves so much.
- A longer term lowers the monthly figure but raises total interest — always compare both before you choose a deal.
How are mortgage repayments calculated?
UK lenders work out a fixed monthly payment that clears both the interest and the capital over your chosen term. The formula uses the loan size, the annual interest rate and the number of months remaining so that the balance hits zero on the final payment.
That is why changing any one input — borrowing more, a higher rate, or a longer term — immediately changes the monthly figure. Our Mortgage Repayment Calculator applies the same capital-and-interest method lenders use for estimates.
Capital vs interest: what each payment is doing
Every repayment splits into two parts. Interest is the lender's charge on the balance you still owe. Capital is the slice that actually reduces that balance.
At the start of a long mortgage, most of each payment is interest because the balance is high. As the balance falls, more of each payment goes to capital. That is why cutting the balance early — with overpayments — has such a large effect on total interest.
The three numbers that set your monthly cost
Loan amount is the biggest driver: borrow £50,000 more and the payment rises roughly in proportion, all else equal. The interest rate is next — even half a percentage point on a large loan adds tens of pounds a month and tens of thousands over the term.
Term length is the trade-off most buyers feel day to day. Stretching from 25 to 35 years lowers the monthly payment but keeps the balance higher for longer, so you pay more interest overall.
| Term | Approx. monthly payment | Approx. total interest |
|---|---|---|
| 20 years | £1,266 | £103,800 |
| 25 years | £1,112 | £133,500 |
| 30 years | £1,013 | £164,800 |
| 35 years | £948 | £198,000 |
Worked example: £200,000 at 4.5% over 25 years
Borrow £200,000 at 4.5% for 25 years and the standard repayment is about £1,112 a month. Over 300 payments you repay roughly £333,500 in total — around £133,500 of that is interest.
In the first year, the majority of each payment still covers interest. By the final years, almost all of each payment reduces the capital. Re-run the numbers with your real offer rate; even 0.25% either way moves both the monthly cost and the lifetime interest.
What happens when your fixed rate ends?
Most new mortgages start on a fixed rate for two or five years. When the fix ends, you usually move onto the lender's standard variable rate (SVR), which is often higher — so the monthly payment can jump unless you remortgage.
Remortgaging to a new deal resets the rate (and sometimes the term). Use the repayment calculator with the SVR and with new fixed-rate quotes side by side before your deal expires, so you are not forced onto the expensive default rate.
Repayment vs interest-only mortgages
A repayment (capital-and-interest) mortgage is the default for UK homebuyers: the balance is designed to clear by the end of the term. An interest-only mortgage charges interest on the full balance each month and leaves the capital to be repaid separately — usually from investments, downsizing or sale.
Interest-only monthly payments look lower, but you still owe the full loan at the end. Lenders apply stricter rules, and most first-time buyers should assume a repayment mortgage unless they have a clear repayment plan a lender will accept.
Fees and extras your monthly figure may miss
The core repayment estimate usually excludes product fees, valuation fees, broker fees, buildings insurance and any life cover. Some lenders add arrangement fees to the loan, which increases the balance and therefore the monthly payment.
Budget for stamp duty, conveyancing and moving costs separately. Our Stamp Duty Calculator covers England and Northern Ireland purchase tax; Scotland and Wales use different systems.
How to cut your mortgage cost
A larger deposit lowers the loan-to-value and often unlocks a better rate. A shorter term raises the monthly payment but slashes total interest if you can afford it. Overpaying within your lender's annual allowance (often 10% of the balance) reduces capital early — see our Should You Overpay Your Mortgage? guide for the decision checklist.
Before you apply, check borrowing power with the Mortgage Affordability Calculator, then model exact monthly costs with the Mortgage Repayment Calculator. Estimates only — your lender's offer is the figure that counts.
Frequently asked questions
- How are mortgage repayments calculated in the UK?
- Lenders use a capital-and-interest formula based on the loan amount, interest rate and term so equal monthly payments clear the balance by the end. Early payments are mostly interest; later payments clear more capital.
- Why is my mortgage payment mostly interest at the start?
- Interest is charged on the outstanding balance. At the beginning that balance is largest, so interest takes most of each payment. As you repay capital, the interest portion shrinks.
- Does a longer mortgage term save money?
- It usually saves money each month but costs more overall. A longer term lowers the payment while increasing total interest. Choose the shortest term you can afford comfortably.
- What happens when my fixed-rate mortgage ends?
- You typically move to the lender's standard variable rate unless you remortgage. That rate is often higher, so payments can rise. Compare new deals before the fix ends.
- Is a repayment mortgage the same as interest-only?
- No. A repayment mortgage clears capital and interest by the end of the term. Interest-only pays interest each month and leaves the full capital outstanding until you repay it separately.
- Do mortgage repayment calculators include fees?
- Most, including ours, estimate the core capital-and-interest payment only. Arrangement fees, insurance and broker costs are usually separate — check your offer illustration for the full monthly outlay.
Try the calculator
Put this into numbers with our free UK calculators.
Need free help? See our useful UK resources including MoneyHelper and StepChange.