| Year | Annual Interest | Annual Principal | Balance Remaining |
|---|---|---|---|
| Enter values on the Calculator tab. | |||
How This Calculator Works
For a repayment mortgage, the monthly payment is calculated so that equal payments clear both interest and capital over the full term: Monthly = P × (r × (1+r)ⁿ) ÷ ((1+r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of months. Early in the term, most of each payment is interest; later payments are increasingly capital — the amortisation schedule tab shows this year by year. For an interest-only mortgage, the payment is simply P × annual rate ÷ 12 — the balance never reduces, so this figure stays constant for the whole term.
Mortgage FAQs
What is the monthly payment on a £150,000 interest-only mortgage at 5%?
£150,000 × 5% ÷ 12 = £625 per month. For interest-only, the capital remains unchanged throughout the term — you must repay the full £150,000 at the end.
Interest-only vs repayment — which is better for buy-to-let?
Interest-only gives lower monthly payments (improving cashflow) but the capital never reduces. Most BTL investors use interest-only to maximise cashflow and plan to repay by selling the property or remortgaging. Repayment builds equity over time. Lenders require rental income to cover 125–145% of the interest payment.
How does LTV affect mortgage rates?
Lower LTV (higher deposit) typically means better mortgage rates. A 25% deposit (75% LTV) gives access to the widest range of BTL products. Many lenders cap BTL at 75–80% LTV. Rates typically improve significantly between 80%, 75% and 60% LTV thresholds.
What is ICR and why does it matter for BTL mortgages?
ICR (Interest Coverage Ratio) is the minimum rental income a BTL lender requires relative to your mortgage payment — typically 125–145%, calculated against either the pay rate or a higher "stress test" rate. If your monthly payment is £876.89, a 125% ICR means the lender wants to see at least £1,096.11/month in rent before approving the loan. This calculator shows the 125% figure as a quick reference; check the exact stress-test rate with your specific lender.
How does the amortisation schedule work?
On a repayment mortgage, each monthly payment is split between interest and capital, but the split isn't even across the term. Early on, most of the payment goes to interest because the outstanding balance is largest; as the balance shrinks, more of each payment goes to capital. The Amortisation Schedule tab above breaks this down year by year so you can see how much equity you'd build by any given point in the term.
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