Your mortgage: how the payment is built, what the term costs, and what a rate change does
Why half of every early payment is interest, what stretching the term to 35 years really costs, the interest-only trap, and how a two-point rate rise moves the monthly figure, with the arithmetic behind each.
One lever among many. Optimising your plan shows every lever, which ones apply to you and how they interact.
A mortgage is the largest purchase most people make and its monthly payment the least understood. Three things decide it: the balance, the rate and the term, and the term does more work than people expect.
How the payment is built
A repayment mortgage charges interest on the balance each month and sets the payment so the balance reaches zero at the end of the term. Early on most of the payment is interest; the split shifts as the balance falls. On £250,000 at 4.5% over 25 years the payment is £1,390 a month, and over the term £166,874 of interest is paid: 40% of everything you pay. Interest-only on the same loan is £938 a month, with the whole £250,000 still owed at the end. The mortgage repayment calculator shows the split for your own loan.
The term trap
Stretching the same loan to 35 years lowers the payment to £1,183, and raises the interest bill to £246,920, £80,000 more, with the interest share rising to half. A longer term buys affordability today at a price paid over decades, and lenders now offer 35 and 40 years routinely. The honest use of a long term is to take it for the lower required payment and then overpay when you can: the overpayment calculator shows what £250 a month does, and the remortgage calculator whether a new deal's fee is worth its rate, and flags the trap of resetting the term each time.
Rate changes
Each point on the rate moves the payment on £250,000 over 25 years by about £140 a month; a two-point rise at remortgage is the shock that affordability tests are meant to anticipate. The affordability calculator shows the stressed payment lenders check; the rent vs buy calculator whether buying beats renting over your stay. In the Hundred Summers app the mortgage is amortised month by month with its rate, term and overpayments, and a rate shock at the next fix is one of the stress tests the plan is run through.
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