Mortgage Interest Rates

To see how rate changes could affect you use the Interest rate calculator below. You should note that rates are currently (when compared to most of the past 25 years ) low. If rates of 10-12% within the next few years would be unaffordable then be very careful.

Calculator Notes

It does not include any element of capital repayment or insurance and these aspects will mean that the total cost any real mortgage will be higher.

Repayment Mortgage Calculator

Calculator Notes

• For mathematical purity the interest is calculated on the basis of the twelth root of the rate selected, and the outstanding capital recalculated each month. In practice mortgage maths is different in detail and so do not expect these figures to match those of any quote.
• It does not include any insurance or other costs and these aspects will mean that the total cost any real mortgage will be higher.

Repayment Mortgage vs Interest Only Mortgage

This calculator is designed to be played with - enter your interest rate and guess how much you expect to pay each month to pay the loan off over 25 years.

Try different numbers until you get a number in year 24 and a zero in 25. (At this point it means that your mortgage will terminate during the last year).

Then put in the maximum you might be able to pay each month into the calculator and see what a difference it makes to the overall payment and time taken to buy your house.

In practice you do not have to commit to this higher amount every month - simply setting money aside and putting it in as a capital reduction when you can spare it will have the same effect. (This may be of particular note to those who have special deals that penalise early capital repayment).

Note - surprisingly small accelerated payments can shorten the mortage by several years and lead to savings of thousands of pounds.

Cheat - for a £100,000 mortgage at 10% interest try 878.5 in the 25 year column and 1100 in the accelerated one.

Interest - for mathematical purity the interest is calculated on the basis of the twelth root of the rate selected, and the outstanding capital recalculated each month. In practice mortgage maths is different in detail and so do not expect these figures to match those of any quote.

This calculator computes the global cost of buying house comparing the repayment mortgage with the investment (ie ISA) based one.

Experiment with different inflation and investment growth assumptions. This will highlight that the choice of mortgage is very much dependent on your view of the future*.

A balanced cautious view for the traditional 20-25 year mortgage would be to go for the investment route, but with the monthly investment being made in the expectation of LOW investment returns. That way any extra performance feeds into a nice surplus.

For shorter terms (under 10 years) investment volatility swings the view towards the certainty of the repayment route.

Intermediate terms are very much dependent upon ones personal position and attitude towards risk and reward.

Calculator Notes

• The Route Comparision figure is derived as follows. Figure=Total Repayment Route Cost less Total Investment Route Cost plus Future Fund Value less Mortgage
• Investment charges - these are based on a Legal & General ISA. Actual charges in your own case may be different.
• For mathematical purity the interest is calculated on the basis of the twelth root of the rate selected, and the outstanding capital recalculated each month. In practice mortgage maths is different in detail and so do not expect these figures to match those of any quote. (For example most lenders DO NOT recalculate the outstanding capital balance with every payment, for the simple reason that this gives them a higher revenue.)
• Mathematicians will note that surely, all other things being equal, if the interest rate and investment growth rate are the same, there should be no difference between the two routes, whereas this calculator shows that when these assumptions are made, the investment route is always the most expensive. This is because of the costs of investment.
• It does not include insurance.