Published 11 December 2018
The cost of your mortgage will depend on several different factors, including how much you are borrowing, your mortgage term, and the rate of interest you’re paying. For example, the longer the mortgage term you choose, the cheaper your monthly payments will be, but the more you’ll end up paying back overall. If you choose a shorter term, your monthly payments will be higher, but you’ll reduce the total amount of interest you pay back.
Mortgages often come with arrangement fees, which can also have an impact on how much your monthly mortgage payments cost if you’ve chosen to add these to the amount you are borrowing.
If you’re not sure which mortgage deal is likely to be most cost-effective for you based on your individual circumstances, seek professional advice from one of our advisers who can run you through all the available options.
To work out exactly how much your monthly mortgage payments will be, you’ll need to know how much you want to borrow, over how many years, and what interest rate you’ll be paying. You then enter these figures into our mortgage calculator and it will crunch the numbers on your behalf and tell you what your monthly payments will be, as well as the total amount you’ll pay over the term. You’ll also see exactly how much interest you’ll pay overall.
For example, if you wanted to borrow £160,000 over a 25-year period at an example mortgage rate of 2.5%, y our monthly payments would be £718, assuming interest rates stay the same. The total amount you’ll pay over the term is £215,336, made up of the £160,000 capital you borrowed and £55,336 in interest.
If you reduced your term to 15 years, borrowing the same amount at the same rate, your monthly payments would be £1,067. The total amount you’ll repay would be £192,035, including £32,025 in interest.
Remember that you’re unlikely to pay the same interest rate throughout your mortgage term though, as most deals only last for a few years. If you don’t remortgage to another deal after your initial deal ends, you’ll default to your lender’s standard variable rate which is likely to result in higher monthly payments.
The exact amount of interest you’ll pay depends on the mortgage rate you’re on. This can change over time. For example, you might be locked into a low mortgage rate for a time, but if interest rates rise during this period, you could end up paying a higher mortgage interest rate when you come to remortgage, or if you move onto your lender’s standard variable rate.
Our mortgage calculator shows you how much you would pay each month and over your mortgage term, assuming the rate remains the same over the mortgage term. If your mortgage rate changes, you can use the calculator again to show what your payments would be on your new rate, as well as the total amount you’ll pay over the mortgage term.
You can see the impact paying a higher or lower interest rate would have on your mortgage payments by using our interest rate calculator.
When choosing a mortgage, it’s important to consider any fees and charges which you might have to pay.
There are usually two types of mortgage fee which lenders may charge, an arrangement fee and a booking fee. The booking fee is a non-refundable charge which allows you to reserve the mortgage you want.
The arrangement fee is, as the name suggests, a fee which is charged by a lender to set up the mortgage on your behalf. It is charged when your mortgage completes.
Often the mortgage deals with the lowest rates can carry the biggest fees, so it’s important to factor these in when trying to work out the best deal for you. If you’re taking out a relatively small mortgage, for example, it may be cheaper to choose a deal with a slightly higher interest rate but lower fees. If, however, you’re taking out a larger mortgage, it could be more cost-effective overall to take out a mortgage with a lower rate and a higher fee. If you’re unsure, we at L&C can advise you on the best options.
Remember to factor in other moving costs too, such as stamp duty, removal costs, and conveyancing fees, when working out how much buying a new home is going to cost.
We've got lots of useful mortgage calculators to help you find out more about how much you can borrow, what it will cost, what fees will be involved and what else you should consider.