How interest-only mortgage payments are worked out
The formula, monthly payments for common loan sizes, the comparison with repayment, and the savings needed to clear the loan.
The monthly cost of a mortgage depends on three things: how much you borrow, the interest rate, and how many years you take to repay it. Here is what common amounts cost each month on a repayment mortgage at an example rate of 4.5%.
At 4.5% over 25 years: a £25,000 mortgage costs about £139 a month, a £30,000 mortgage about £167, and a £65,000 mortgage about £361.
Monthly cost by loan size and term
| Amount borrowed | 10 years | 15 years | 20 years | 25 years |
|---|---|---|---|---|
| £25,000 | £259.10 | £191.25 | £158.16 | £138.96 |
| £30,000 | £310.92 | £229.50 | £189.79 | £166.75 |
| £50,000 | £518.19 | £382.50 | £316.32 | £277.92 |
| £65,000 | £673.65 | £497.25 | £411.22 | £361.29 |
| £100,000 | £1,036.38 | £764.99 | £632.65 | £555.83 |
| £150,000 | £1,554.58 | £1,147.49 | £948.97 | £833.75 |
| £200,000 | £2,072.77 | £1,529.99 | £1,265.30 | £1,111.66 |
| £250,000 | £2,590.96 | £1,912.48 | £1,581.62 | £1,389.58 |
| £300,000 | £3,109.15 | £2,294.98 | £1,897.95 | £1,667.50 |
All figures are at 4.5% for the whole term. Real deals change rate when a fixed or tracker period ends, so treat these as a guide and put your own numbers into the mortgage repayment calculator.
A longer term costs less a month but more overall
Stretching the term lowers the payment, but you pay interest for longer.
| At 4.5% | Total interest over 15 years | Total interest over 25 years |
|---|---|---|
| £30,000 | £11,310 | £20,025 |
| £65,000 | £24,504 | £43,387 |
| £200,000 | £75,398 | £133,499 |
On £30,000, taking 25 years instead of 15 cuts the payment from £229.50 to £166.75 a month, but adds about £8,700 of interest.
How much the rate moves it
On a £30,000 mortgage over 15 years, each half a percentage point adds roughly £8 a month.
| Rate | £30,000 over 15 years |
|---|---|
| 4% | £221.91 |
| 4.5% | £229.50 |
| 5% | £237.24 |
| 5.5% | £245.13 |
| 6% | £253.16 |
Paying a little extra
Small overpayments go a long way on a small mortgage. Paying £50 a month extra on £30,000 at 4.5% over 15 years clears it in 11 years and 6 months instead of 15, and saves about £2,850 in interest. Most lenders allow overpayments up to a limit each year without a charge, so check yours first. The mortgage overpayment calculator shows the effect for your own loan.
Small mortgages
Amounts like £25,000 to £65,000 usually come up when buying with a large deposit, borrowing a little more on an existing home, or remortgaging what is left near the end of a term. Some lenders set a minimum loan size, so it is worth checking that before you apply. If you already have a mortgage, see how much you can remortgage for.
This is general information, not financial or tax advice.
It explains published rules and figures. Your own position depends on your full circumstances,
so speak to a qualified adviser before acting on it.