Mortgage & Overpayment Calculator

How repayment mortgages are calculated

A UK repayment mortgage uses amortisation: you pay a fixed amount each month that covers that month's interest plus a slice of the capital. The payment is found with the annuity formula:

M = P × r ÷ (1 − (1 + r)^−n)

where P is the loan, r is the monthly rate (annual rate ÷ 12) and n the number of monthly payments.

Compound interest and amortisation

Each month interest is charged on the outstanding balance: interest = balance × r. Early on the balance is large, so most of your payment is interest and only a little reduces the debt. As the balance falls, the interest portion shrinks and more of each payment goes to capital — which is why the balance falls slowly at first and quickly at the end.

An overpayment goes straight to capital. Because it removes debt that would otherwise have been charged interest every month for the rest of the term, the saving compounds: a modest overpayment early in the mortgage can cut years off the term. This calculator simulates the loan month by month with your overpayment added to find the new term and total interest.

Figures assume a constant rate for the whole term; real mortgages usually revert to a variable rate after a fixed period. Check your lender's overpayment limits and early repayment charges.

Monthly repayment per 100,000 borrowed (25 years)