Mortgages · 6 min read
How Mortgage Repayments Are Calculated
If you've ever looked at a mortgage offer and wondered how the lender arrived at that exact monthly figure, you're not alone. The maths behind a repayment mortgage isn't magic — it's a single, well-established formula that balances how much you borrow, your interest rate, and how long you take to pay it back.
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The three numbers that decide your payment
Every repayment mortgage comes down to three inputs: the amount borrowed (the principal), the annual interest rate, and the term in years. Change any one of these and the monthly payment moves.
A larger loan means a bigger payment. A higher rate means more interest each month. A longer term spreads the payments out, which lowers each one — but increases the total interest you'll pay over the life of the mortgage.
The amortisation formula
Lenders use the standard amortisation formula: M = P · r / (1 − (1 + r)^−n), where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (years × 12).
You don't need to crunch the maths by hand. Pop your figures into our mortgage calculator and you'll see the exact monthly figure, plus the total interest you'll pay across the term.
Why early payments are mostly interest
At the start of the mortgage your balance is at its largest, so the interest portion of each payment is at its largest too. As the balance shrinks, the interest shrinks with it, and more of each payment chips away at the principal.
This is called amortisation. By the final years of a 25- or 30-year mortgage, almost all of your payment goes towards paying down the balance.
Fixed vs variable rates
With a fixed-rate deal the rate (and therefore your monthly payment) stays the same for the fixed period — usually 2, 5 or 10 years. With a variable or tracker rate it can move up or down with the Bank of England base rate or your lender's standard variable rate.
After your fixed period ends you'll typically roll onto a higher standard variable rate unless you remortgage. It's worth setting a calendar reminder a few months before the fix ends.
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Open the Mortgage CalculatorFrequently asked
- Does the calculator include fees and insurance?
- Our mortgage calculator gives you the pure principal and interest payment. Arrangement fees, valuation fees, buildings insurance and life cover are added on top.
- What's a typical UK mortgage term?
- 25 years has long been the standard, but 30- and 35-year terms are now common for first-time buyers to keep monthly payments affordable.
- Will a bigger deposit lower my payment?
- Yes, in two ways: you borrow less, and a lower loan-to-value (LTV) usually unlocks a better interest rate.
This guide is general information, not financial advice. Last updated May 2026.