How much will your mortgage cost?

When you take out a mortgage, you’re borrowing money from a lender and agreeing to pay it back within a certain period of time.

The total cost of your monthly payments will depend on how much you borrow, the length of your mortgage term, and your interest rate. A longer mortgage term may mean lower monthly payments, but you’ll end up paying more in interest overall.

Most mortgages are repaid over a long-term, typically 25 to 35 years, although shorter or longer terms may be available depending on your financial situation.

The amount you need to borrow depends on the property's price and how much deposit you can afford. A larger deposit usually means you can borrow less and may qualify for better interest rates.

You can choose to pay both the repayment and interest or choose an interest only payment structure. What one you choose will impact your repayment costs.

Difference between interest only and repayment mortgages

A repayment mortgage means you pay back both the loan (the amount you borrowed) and the interest every month. By the end of the mortgage term, you will have fully paid off the loan and own the property outright.

A repayment mortgage has higher monthly payments because you’re paying off both the loan amount and the interest. However, by the end of the term, the debt is fully cleared.

An interest-only mortgage means you only pay the interest each month. Because you only pay the interest, the loan amount stays the same. At the end of the term, you’ll need to repay the full loan, often by selling the property, using savings, or investing in other ways.

An interest-only mortgage has lower monthly payments since you’re only paying the interest. But you’ll need a plan to repay the full loan at the end, which can make it riskier and more expensive in the long run if your investments don't perform as expected or your savings take a hit.

If you choose an interest only mortgage, at the end of your mortgage term you’ll still owe the original loan amount, whereas with a repayment mortgage, you’ll have paid off both at the end of the term.  

How are mortgages priced?

Several key factors can influence how your mortgage is priced and what it will cost you.

Base interest rates

The Bank of England sets a base interest rate, which has an influence on how much lenders charge especially for their trackers and Standard Variable Rate (SVR). If the base rate rises, mortgage rates often go up. If it falls, they may go down.

Swap rates

Swap rates are the rates at which lenders can borrow money from other financial institutions for a fixed period of time. Generally, mortgage lenders will set the fixed rates they offer based on swap rates, so if swaps rise then fixed rates tend to become more expensive.

Loan-to-value ratio (LTV)

This compares the size of your mortgage to the value of your property. A lower LTV (e.g., borrowing 60% of the property's value) usually gets you a better rate. Higher LTVs (e.g., 90%) are riskier for lenders, so they charge more.

Type of mortgage

Fixed-rate mortgages

The interest stays the same for a set period, usually costing a bit more upfront for stability.

Variable-rate mortgages

The rate can change (up or down) with the lenders or market’s adjustments.

Your credit score

Lenders check your credit history to decide how risky it is to lend to you. A good score could get you a lower rate as it may give you access to more lenders and options, while a poor score often means higher costs and fewer options.

Market competition

Lenders compete to attract customers, so they adjust their pricing based on market demand.

How monthly payments are calculated

Amount borrowed

As you’d expect the more you borrow the higher your payments will be. It’s important to keep an eye on what might happen if rates go up too, your mortgage quote should give you an example of this.

Loan term

Shorter-term mortgages (e.g., 15 years) will have higher monthly payments than longer terms (e.g., 30 years) which spread payments. But taking a longer term will cost more overall as you’ll pay more interest.

Interest rate

Whilst it can be tempting to opt for the lowest rate you can find you need to weigh up any arrangement fees the lender might charge. Sometimes a higher rate with a lower fee can work out more cost effective.

If you’re thinking of getting a mortgage, it’s a good idea to shop around or speak to a broker for advice. They can help you find the best deal for your situation.

Interest before your first payment

It’s important to remember that interest starts building up as soon as you draw down your mortgage (when the lender transfers the funds). Even though your first payment might not be due for a few weeks or months, interest will still accrue during this period. Some lenders will include this initial interest in your first payment, so it’s worth budgeting for a slightly higher amount upfront.

So, what does this look like in reality? If your completion happens on the 10th of October, the first mortgage payment would usually be in November. So, if your mortgage payments are fixed at £800pcm (for a 2-year fixed deal), your first mortgage payment will be closer to £1,000 because it adds the 21 days of interest that you're charged from October onto the first payment. From your second payment onwards, it will go back to your original payment.

Overpayments

Overpaying your mortgage means paying more than the required monthly amount. Many lenders allow some degree of overpayment without penalty, often up to 10% of your loan balance each year. Overpayments can reduce the amount you owe more quickly, meaning you’ll pay less interest over time. This can also shorten the length of your mortgage, giving you financial freedom sooner.

Early repayment charges

While overpaying can be helpful, some mortgage deals include early repayment charges (ERCs). These are fees charged if you repay your mortgage early or overpay more than your lender allows. Always check your mortgage offer to understand if ERCs apply and how they might affect your plans to pay off your mortgage faster.

Mortgage broker costs

Some brokers charge a flat fee (typically £300–£500), while others charge a percentage of the mortgage amount (e.g., 0.3%).

Mortgage brokers help you navigate the mortgage market, find deals tailored to your needs, and handle the application process. Using a broker can save you time and may even help you secure a better deal.

Because L&C’s advice service is fee free, you won’t pay us a penny. We receive a commission from your lender, just as any other broker does on top of the fee they might charge you. So, with L&C, you get expert advice from professional brokers without having to pay us directly.

Using L&C

Because mortgage costs can be complex, speaking to a professional mortgage advisor is a good idea. They can help you compare deals from different lenders and explain the terms and conditions in detail. A mortgage advisor will also consider your financial circumstances to recommend the best options for you.

FAQs

How much interest will I pay?

The interest you pay on your mortgage depends on your current rate, which can change. If you have a low rate now, your payments could increase if interest rates go up, especially when you remortgage or switch to your lender’s standard variable rate.

How much will a 100k mortgage cost a month?

The cost of your monthly mortgage payments depends on several factors, including the type of mortgage, whether it’s interest-only or repayment, the loan duration, and the interest rate.

Interest-only mortgages have lower payments since you only pay interest, but you must save to pay off the principal later. Fixed-rate mortgages keep payments the same for the term, while variable-rate mortgages can change over time.

Additionally, shorter mortgage terms, like a 5-year repayment, result in higher monthly payments compared to longer terms, such as 20 years.

How is a mortgage calculated?

Mortgage payments have two parts: the amount borrowed (the capital) and the interest. In a repayment mortgage, your monthly payments reduce both the capital and interest. With an interest-only mortgage, you only pay the interest, so your debt stays the same. Your payments depend on the amount borrowed, the mortgage length, the type of mortgage, and the interest rate. When you get a mortgage through L&C, we’ll help you understand your options and monthly payments.

How many times your salary can you borrow for a mortgage?

The amount you can borrow for a mortgage varies by lender. If you pass the affordability checks, most let you borrow between 4.5 and 5.5 times your annual salary. For example, earning £30,000 might allow you to get around £150,000. Some lenders may go up to 6 times your salary for certain products or professions. They also consider factors like your monthly spending, deposit size, age, and employment type.

Can you borrow more money than your house costs?

If you’re buying a property that needs renovation, you might be wondering whether you can take out an additional amount on your mortgage to cover the work that needs to be done. Unfortunately, lenders base their mortgage offers on the purchase price or current value of the property. If you have a large deposit, you may be able to hold some of that back to carry out the work and borrow more on your mortgage, but generally lenders will not lend more than 90-95% of the current value.

How do I increase my chances of getting mortgage approval?

To help you get approved for a mortgage, check your credit report before you apply. You can get your report for free from agencies like Experian. Look for any mistakes in your report. Errors could hurt your chances of getting a mortgage.

Try to save as much money as you can for a deposit. However, if you are a first-time buyer or have trouble saving a large deposit, there are options for you. You can consider schemes like shared ownership or shared equity. Another option could be a guarantor mortgage, where a family member agrees to cover your monthly payments if you can't.

To figure out how much deposit you need it’s helpful to know what ‘loan to value’ (LTV) means, so the size of mortgage in relation to the value of the home you want to buy. The lower your LTV, the wider range of mortgages are available to you. Use our LTV calculator to work out your loan to value and find out which mortgages are available to you.