A repayment mortgage payment comes from one formula: the loan, the monthly interest rate and the number of payments go in, and the single fixed payment that clears the loan by the end of the term comes out. A £200,000 loan at 4.5% over 25 years works out at £1,111.66 a month.
Here is how that number is built, what each part means, and why the balance hardly moves in the first few years.
What is the formula for a mortgage repayment?
Lenders use the standard amortisation formula:
payment = P × i(1 + i)ⁿ ÷ ((1 + i)ⁿ − 1)- P is the amount you borrow — the property price minus your deposit.
- i is the interest rate for one payment period. For monthly payments it is the annual rate divided by 12, as a decimal: 4.5% a year is 0.045 ÷ 12 = 0.00375 a month.
- n is the number of payments — the term in years × 12.
The formula finds the one payment that, made every month, pays each month’s interest and clears the last of the loan with the final payment. It assumes the rate stays the same for the whole term.
A worked example: £200,000 at 4.5% over 25 years
- The loan. P = £200,000.
- The monthly rate. i = 0.045 ÷ 12 = 0.00375.
- The number of payments. n = 25 × 12 = 300.
- The growth factor. (1 + 0.00375)³⁰⁰ ≈ 3.0737.
- The payment. £200,000 × 0.00375 × 3.0737 ÷ (3.0737 − 1) ≈ £1,111.66 a month.
Over 300 payments that is £333,499.49 in total — the £200,000 borrowed plus £133,499.49 of interest.
Try it with your own numbers
The calculator below runs the same formula. It opens with a £750,000 property and a £150,000 deposit at 5.25% over 25 years, which is £3,595.49 a month — change any figure and the payment and the year-by-year schedule update as you type.
Based on a 5.25% annual interest rate over 25 years, with monthly repayment payments.
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | £11,930 | £31,216 | £588,070 |
| 2 | £12,572 | £30,574 | £575,498 |
| 3 | £13,248 | £29,898 | £562,250 |
| 4 | £13,960 | £29,185 | £548,290 |
| 5 | £14,711 | £28,435 | £533,578 |
| 6 | £15,502 | £27,643 | £518,076 |
| 7 | £16,336 | £26,810 | £501,740 |
| 8 | £17,215 | £25,931 | £484,525 |
| 9 | £18,141 | £25,005 | £466,384 |
| 10 | £19,116 | £24,030 | £447,268 |
| 11 | £20,144 | £23,001 | £427,123 |
| 12 | £21,228 | £21,918 | £405,896 |
| 13 | £22,369 | £20,776 | £383,526 |
| 14 | £23,573 | £19,573 | £359,954 |
| 15 | £24,840 | £18,305 | £335,113 |
| 16 | £26,176 | £16,970 | £308,937 |
| 17 | £27,584 | £15,562 | £281,353 |
| 18 | £29,068 | £14,078 | £252,285 |
| 19 | £30,631 | £12,515 | £221,654 |
| 20 | £32,278 | £10,867 | £189,376 |
| 21 | £34,014 | £9,132 | £155,361 |
| 22 | £35,844 | £7,302 | £119,518 |
| 23 | £37,771 | £5,374 | £81,746 |
| 24 | £39,803 | £3,343 | £41,944 |
| 25 | £41,944 | £1,202 | £0 |
Enter your details to see the chart.
For exact annual figures, .
- Estimated repayment payment
- £3,595.49 per month
- Total interest paid
- £478,646
- Total amount repaid
- £1,078,646
- Interest as % of loan
- 79.8%
- Payments
- 300 monthly over 25 years
Why does so little of each early payment reduce the loan?
Because interest is charged on what you still owe, and at the start you owe the most.
In month one of the example, the interest is £200,000 × 0.00375 = £750. The payment is £1,111.66, so only £361.66 comes off the balance. Across the whole first year you pay £8,909.36 in interest and just £4,430.62 off the loan.
Each month the balance is a little lower, so the interest is a little lower, and a little more of the same payment goes to capital. On this loan the capital share overtakes the interest share in year 11.
How do the rate and the term change the payment?
Both matter, in different ways. Here is the same £200,000 loan with one thing changed at a time:
| Rate and term | Monthly payment | Total interest |
|---|---|---|
| 4.5% over 20 years | £1,265.30 | £103,671.70 |
| 4.5% over 25 years | £1,111.66 | £133,499.49 |
| 4.5% over 30 years | £1,013.37 | £164,813.42 |
| 5.5% over 25 years | £1,228.17 | £168,452.50 |
- A longer term lowers the monthly payment but raises the total interest, because the balance stays high for longer.
- A higher rate raises both. One percentage point on this loan adds £116.51 a month and almost £35,000 over 25 years.
To set two terms side by side, use the 15 vs 30 year mortgage calculator.
What about an interest-only mortgage?
An interest-only payment is just the interest: P × i. On the same loan that is £200,000 × 0.00375 = £750 a month. It is cheaper each month because none of it repays the loan — the full £200,000 is still owed at the end of the term and has to be paid off another way, often by selling the property or from savings.
Why might a real mortgage payment differ?
The formula is exact for a fixed rate, but a real mortgage rarely keeps one rate for 25 years.
- The rate changes. Most UK deals fix or discount the rate for two to five years, then move to the lender’s variable rate, and the payment is recalculated each time.
- Fees are added. An arrangement fee added to the loan increases P, and with it the payment.
- Lenders round and count days differently. Small differences in method can move the payment by a few pence or pounds.
Your lender’s illustration is the figure that counts. The calculator is for understanding and comparing, not a quote.
What to do next
Put your own price, deposit, rate and term into the mortgage repayment calculator to see the payment and the full schedule. If you are still deciding how much to borrow, start with the UK mortgage affordability calculator.