1. What is Mortgage Interest?

Mortgage interest is the cost you pay to borrow money for your home loan. In the UK, most mortgages calculate interest monthly based on the outstanding principal amount and the annual interest rate.

2. How Does the Calculator Work?

The calculator uses the mortgage interest equation:

Where:

• \( P \) — Principal amount (GBP)
• \( r \) — Annual interest rate (as decimal)

Explanation: The equation converts the annual rate to a monthly rate by dividing by 12, then applies it to the principal amount.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with budgeting and shows how much of your payment goes toward interest versus principal repayment.

4. Using the Calculator

Tips: Enter the principal amount in GBP and the annual interest rate as a percentage (e.g., 3.5 for 3.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this for repayment or interest-only mortgages?
A: This calculates the interest portion for one month. For interest-only mortgages, this would be your full payment.

Q2: How does compounding affect this?
A: This shows simple monthly interest. Actual mortgages may compound, increasing total interest over time.

Q3: What's a typical UK mortgage rate?
A: Rates vary but typically range from 1.5% to 6% depending on market conditions and borrower circumstances.

Q4: Does this include fees?
A: No, this only calculates interest. UK mortgages often have arrangement fees and other charges.

Q5: How accurate is this for variable rate mortgages?
A: It shows interest at the current rate. Variable rates change with the lender's standard variable rate or Bank of England base rate.