Q&A: Mortgage calculator

To find out how the mortgage calculator works and an explanation of some of the terms, use the links below or scroll down the page.

What is the mortgage calculator? Is the mortgage calculator accurate? What does "interest rate" mean? What does "interest-only" mean?

How should the calculator be used? What does "mortgage required" mean? What does "monthly repayment" mean?

WHAT IS THE MORTGAGE CALCULATOR?

The calculator allows you to work out how much your monthly mortgage might cost, based on a number of variables.

After entering the amount you would like to borrow, the term of the loan and the interest rate, it estimates the cost of a repayment mortgage and an interest-only mortgage.

RELATED LINK Mortgage and equity calculators

Entering different figures into the calculator allows you to get an idea of how your payment will change if you move home, vary the length of the loan, or if interest rates change.

It is intended to be used as a guide only, not as a replacement for professional mortgage advice.

Back to top

HOW SHOULD THE CALCULATOR BE USED?

Enter the amount of the mortgage, the repayment period and the interest rate in the relevant boxes.

Once you are happy with your choices, hit the calculate button and the monthly cost of a repayment mortgage and an interest-only mortgage will appear.

Back to top

IS THE CALCULATOR ACCURATE?

The mortgage calculator is intended to be used as a guide only and not as a basis for making any financial decisions.

The actual repayments may vary from the amount shown.

Back to top

WHAT DOES "MORTGAGE REQUIRED" MEAN?

Mortgage required refers to the amount of the loan needed to buy a home.

It is not the same as the cost of the home itself, as some people may have equity, or savings which they would put towards it.

For example, if a house costs £300,000 and a prospective buyer has £100,000, the mortgage required is £200,000.

Back to top

WHAT DOES "INTEREST RATE" MEAN?

All lenders charge a sum for allowing people to borrow money from them.

The amount charged is a proportion of the loan and it is this which constitutes the interest rate.

The interest rate varies between lenders and according to the type of loan the borrower has chosen.

Back to top

WHAT DOES "REPAYMENT MORTGAGE" MEAN?

Each month a repayment mortgage pays off a little of the purchase price of the home, as well as the interest on the loan.

If all the payments are made, the mortgage is cleared at the end of the loan term and the house is wholly owned by the purchaser.

Back to top

WHAT DOES "INTEREST-ONLY" MEAN?

With an interest-only mortgage, only the interest charged by the lender is paid off each month.

The cost of the property is not included in the payments. Buyers are expected to make alternative plans to cover the price of their home.

Back to top