How to calculate your mortgage payment

You can calculate your mortgage payments by using the Twindig mortgages payment calculator. You will need to enter three pieces of information:

The mortgage amount: how much you are borrowing or would like to borrow, please enter the amount in £

The interest rate: this is how much interest the lender will charge you on the mortgage. If you have a mortgage quote there are several mortgage rates that you could use, we discuss each in the ‘Mortgage and Interest rates’ section below

The mortgage term: this is how long your mortgage will take to pay off completely. The standard term is 25 years, although the term can be set at any length. Some are set at 10 years and some at between 30 to 35 years. Extending the length of the term of the mortgage will reduce the monthly payments, BUT will mean that you pay more interest because you are borrowing the money for a longer period of time. You can see the impact of increasing or reducing your mortgage term on how much you will pay by using the Twindig home equity calculator, which you can see if you are logged in and viewing the analysis tab for your property.

How much can I afford to borrow?

To help you calculate or work out how much you can afford to borrow Twindig has designed a household budget template for you to use.

https://www.twindig.com/market-views/household-budget-template

You can use this to look at all your income and expenses to work out how much you can afford to pay each month on your mortgage

Mortgage payment calculator results

The Twindig mortgage payments calculator will show you the mortgage payments for both a repayment mortgage and an interest-only mortgage. The payments on an interest-only mortgage will be lower, but remember an ‘interest only’ mortgage only pays the mortgage interest. If you borrow £100,000 over 25 years with an interest-only mortgage at the end of the 25 years you will still owe the lender £100,000. Whereas with a repayment mortgage you pay interest and part of the £100,000 you have borrowed each month, so at the end of the mortgage term you have paid back all of the £100,00 you borrowed. Twindig recommends that you choose a repayment mortgage over an interest-only mortgage.

Mortgage and Interest rates

Initial rate: If you are looking at a 2 or 5-year fixed-rate mortgage, the initial rate is the interest rate you will pay during the fixed term. If you are looking at a 2-year fixed-rate mortgage with a mortgage rate of 2.0% this means that the mortgage interest rate is fixed for two years at 2.0%. The initial rate is sometimes called a ‘teaser’ rate as it might have been designed to tease you into choosing the mortgage.

Standard Variable Rate: Once the fixed-rate period comes to an end the mortgage rate is likely to switch to the lender’s Standard Variable Rate, this rate is usually much higher than the initial or teaser rate. Standard Variable rates are set by the lender. As the name suggests they are variable, which means that the lender can increase or decrease the interest rate charged whenever they want to, although your mortgage contract terms and conditions will explain how much notice they have to give you ahead of any changes

Annual Percentage Rate of Charge (APRC): The APRC takes is designed to reflect the whole cost of the mortgage over its entire term. If your mortgage has a two year fixed element followed by a 23-year variable mortgage interest rate the APRC provided a blended rate taking into account the two-year fixed-rate period and the 23-year variable period. The APRC also takes into account all the other fees and costs you have to pay such as product and arrangement fees. The purpose of the APRC is to allow you to compare the overall cost of different mortgage products on a like for like basis.

Which mortgage rate should I use in the mortgage payment calculator

It depends on what you are trying to work out. If you just want to quickly see how much your new mortgage payment will be, simply use the initial rate. If you want to compare the true cost of a range of different mortgage options, then use the APRC.