How this is worked out
Repayments use the standard annuity formula. You borrow the price less your deposit and repay it in equal monthly instalments across the term:
M = P · r(1+r)ⁿ ÷ ((1+r)ⁿ − 1)
where P is the amount borrowed, r is the annual rate divided by twelve, and n is the number of months. Early payments are mostly interest, because interest is charged on the outstanding balance; as that falls, more of each identical payment goes to capital.
Council tax, buildings insurance and any service charge are added as monthly amounts. Your lender does not collect these — unlike an American escrow account — but they leave your account just as reliably, so leaving them out gives a monthly figure that is comfortably wrong.
A worked example
- Property price
- £290,000
- Deposit (15%)
- £43,500
- Amount borrowed
- £246,500
- Rate / term
- 4.8% over 25 years
- Monthly repayment
- £1,412.66
- Council tax (Band D)
- £175.00
- Buildings insurance
- £25.00
- Total each month
- £1,612.66
Your rate is fixed for two or five years, not twenty-five
This is the structural difference between a UK mortgage and an American one, and it changes how you should read every number on this page. You are quoted a rate fixed for two, three or five years. At the end of it you revert to the lender’s standard variable rate, which is invariably much higher, so almost everyone remortgages.
That means the twenty-five-year total interest figure here is a projection on the assumption that today’s rate continues — useful for comparison, not a prediction. The number that actually matters for your budget is the monthly repayment during the fixed period, and what it might become at the end of it.
A sensible test: run the calculator again at two or three percentage points higher and check whether the payment is still affordable. That is roughly what a lender’s stress test does, and it is the question that catches people out when a fix ends.
Loan-to-value bands do what mortgage insurance does elsewhere
The UK has no equivalent of American PMI or Australian LMI for residential borrowers. Mortgage indemnity guarantee has largely disappeared. Instead, the risk of a small deposit is priced into the rate.
Rates step at 95%, 90%, 85%, 80%, 75% and 60% loan-to-value, and the steps are not small — moving from 90% to 85% can be worth a quarter to half a percentage point. On £246,500 that is real money every month for the whole fixed period.
The practical consequence: if you are close to a band, finding a little more deposit is often worth far more than it appears. Getting from 90.5% to 89.9% loan-to-value can pay for itself several times over across a five-year fix.
Overpayments and the ten per cent rule
Most fixed-rate deals allow you to overpay up to ten per cent of the balance each year without penalty. Beyond that you pay an early repayment charge, typically one to five per cent of the amount overpaid.
Within that allowance, overpaying is one of the most reliable returns available to a UK household: it is equivalent to earning your mortgage rate, tax-free and risk-free. At 4.8% that beats most savings accounts after tax.
Two things to check first. Confirm your lender reduces the term rather than the monthly payment — some default to the latter, which saves far less interest. And keep an accessible emergency fund, because money overpaid into a mortgage is difficult to get back out.
Stamp duty and the other upfront costs
This calculator covers the mortgage, not the purchase. Stamp Duty Land Tax in England and Northern Ireland, Land and Buildings Transaction Tax in Scotland, and Land Transaction Tax in Wales are all separate, all substantial, and all payable in cash rather than borrowed.
Budget for conveyancing, a survey, lender arrangement fees and moving costs on top. On a £290,000 purchase these commonly total several thousand pounds before you have paid a single instalment.
Assumptions and sources
- Repayment formula
- Standard annuity formula, applied monthly. Verified in tools/test/finance.mjs against published repayment tables.
- Overpayment allowances
- Ten per cent of the outstanding balance per year is the common market standard on fixed deals; your own terms take precedence. checked 2026-08
- Council tax
- You enter your own figure. Set by your local authority and varies by band and area.
- Mortgage insurance
- Not applicable to UK residential borrowers. Loan-to-value risk is priced into the interest rate instead.