# mortgagecalculator.siten.co — full text > The complete text of every guide in this language, so an answer engine can read the catalogue in one request. Nothing here is absent from the visible pages. ## How Long Should a Mortgage Be? The Term Trade-Off https://mortgagecalculator.siten.co/guides/choosing-a-mortgage-term-length Updated 2026-08-09 · Refinancing and overpaying - The term is the most consequential number on the application and usually the least considered. - Payment relief per extra decade shrinks while the interest cost per extra decade grows — the trade turns unfavourable around thirty years. - A long term with regular overpayments behaves almost like a short one, but lets you stop in a difficult month. - Retirement age, regulatory limits, LTV and product availability all constrain the term you can actually take. - Every remortgage is a free chance to shorten the term, and almost everyone rolls the old term forward instead. The term is the most consequential number on the application and the one given the least thought. It is usually inherited from whatever the calculator defaulted to. The trade-off is straightforward. A longer term makes each payment smaller and the total much larger, and beyond a certain point the payment stops falling meaningfully while the total keeps climbing. ### What each decade costs | 15 years | 1,562 | 81,200 | 281,200 | | 20 years | 1,299 | 111,700 | 311,700 | | 25 years | 1,146 | 143,800 | 343,800 | | 30 years | 1,049 | 177,700 | 377,700 | | 40 years | 941 | 251,700 | 451,700 | 200,000 at 4.8%, illustrative. Read the first and third columns together: going from 25 to 30 years saves 97 a month and costs an extra 33,900 in interest. ### The diminishing return The payment relief per extra decade shrinks while the interest cost per extra decade grows. That is the shape of the whole decision, and it is why forty-year terms are a solution to a specific problem rather than a general improvement. - 15 → 20 years: payment falls 263, interest rises 30,500. - 20 → 25 years: payment falls 153, interest rises 32,100. - 25 → 30 years: payment falls 97, interest rises 33,900. - 30 → 40 years: payment falls 108 over two decades, interest rises 74,000. Somewhere around thirty years the trade turns clearly unfavourable in most markets. Beyond that you are buying a small amount of monthly room for a great deal of money. ### The flexible answer There is a middle path that most borrowers should take: choose the longer term and overpay. A long term with regular overpayments behaves almost exactly like a short term, with one crucial difference — you can stop in a difficult month, and a contractual shorter term will not let you. | 15-year term | High, contractual | Fast | None | | 25-year term with overpayments | Lower, contractual | Nearly as fast | High | | 25-year term, no overpayments | Lower | Slow | High | | 40-year term | Lowest | Very slow | High | The second row is the arrangement to aim for, provided the overpayments actually happen. Automate them, and check that they reduce the term rather than the payment. ### The constraints on the term - Retirement age. Lenders generally want the term to end at or before your expected retirement, which caps the term for older borrowers. - Regulatory limits. Several markets cap the maximum term or apply extra scrutiny beyond a threshold. - Affordability in reverse. A longer term can be the only way to pass the affordability test, which is a legitimate use of it. - Product availability. The longest terms are not offered on every product or at every LTV. - Mandatory amortisation in markets such as Sweden effectively sets a minimum repayment speed regardless of the nominal term. ### Choosing, in order - Find the shortest term whose payment you could comfortably meet at a rate three points higher than today’s. - Check whether that term is available at your LTV and within the lender’s age limits. - If it is uncomfortable, take a longer term and commit to a standing overpayment instead. - Confirm that overpayments will reduce the term rather than the monthly payment. - Revisit at each remortgage: shortening the term at that point costs nothing and is easy to forget. - Do not extend the term to fund something else without comparing the total cost. Step five is where most of the practical benefit sits. Every remortgage is a free opportunity to shorten the term, and almost everyone rolls the remaining term forward without thinking about it. Q: Is a 15-year or a 30-year mortgage better? A: A shorter term costs far less in total and demands a much higher payment; a longer term is affordable and expensive. On 200,000 at 4.8%, fifteen years costs about 81,000 in interest and thirty years about 178,000. For most households the better answer is neither extreme: take the longer term for the lower contractual obligation, then overpay regularly. That behaves almost like the short term while leaving you the option of stopping in a difficult month. Q: Is a 40-year mortgage a bad idea? A: It is a solution to a specific problem rather than a general improvement. Beyond about thirty years the payment stops falling meaningfully while the total interest keeps climbing sharply — the last decade of a forty-year term buys very little monthly room for a great deal of money. It is defensible when it is the only way to buy at all, and it should come with a plan to overpay or to shorten the term at the first remortgage. Q: Can I shorten my mortgage term later? A: Yes, and remortgaging is the natural moment to do it — it costs nothing extra and is very easy to forget. Most people roll the remaining term forward without thinking, so a twenty-five-year loan quietly becomes twenty-five years again five years in. You can also shorten within an existing product by overpaying, provided the lender applies the overpayment to the term rather than to the monthly payment, which is worth asking for explicitly. ## Overpaying Your Mortgage: What It Actually Saves https://mortgagecalculator.siten.co/guides/overpaying-your-mortgage Updated 2026-08-09 · Refinancing and overpaying - Interest is charged on the balance, so an overpayment saves interest for every remaining month — early beats late. - Reducing the term saves several times what reducing the payment does, and many lenders default to the wrong one. - Check the penalty-free allowance, the interest calculation method and whether you hold more expensive debt first. - Keep an emergency fund: money paid into a mortgage is hard to retrieve. - Automate it. An overpayment that needs a monthly decision stops in a busy month and never restarts. Overpaying is the highest-return, lowest-drama financial move available to most households, and it is quietly undermined by a default setting almost nobody checks. When you overpay, the lender can either reduce your term or reduce your monthly payment. The first saves several times what the second does. Many lenders default to the second, and they do not usually mention it. ### Why an overpayment is worth so much Interest is charged on the balance outstanding, so an amount removed from the balance today is an amount you never pay interest on again, for every remaining month. The saving is therefore multiplied by the time left, which is why the same overpayment made in year two is worth several times what it is worth in year twenty. | 100 per month from the start | Roughly 4 years off the term, tens of thousands of interest saved | | 200 per month from the start | Roughly 7 years off, a very large share of the interest gone | | One lump of 10,000 in year 2 | Around 2 years off the term | | The same 10,000 in year 20 | A small fraction of that saving | | Nothing | Full term, full interest | Indicative figures on a standard repayment loan. The pattern — early and regular beats large and late — is the reliable part. ### Term reduction against payment reduction This is the setting that matters and it is worth a phone call. Reducing the term keeps your payment the same and finishes the loan sooner, which is where the large saving lives. Reducing the payment lowers your monthly cost and leaves the term untouched, which saves far less. - Reduce the term: payment stays, loan ends earlier, saving is large. - Reduce the payment: monthly cost falls, term unchanged, saving is small. - Many lenders apply payment reduction by default and will switch on request. - Ask explicitly, in writing, and check the next annual statement to confirm. If the household budget genuinely needs the lower payment, taking it is a legitimate choice. Taking it by accident is not. ### Before you overpay, check three things - The overpayment allowance. Most fixed products permit around ten per cent of the balance a year without penalty; beyond that an early repayment charge applies. - Whether interest is calculated daily or monthly. On daily rest the overpayment starts working immediately; on monthly rest it waits for the cycle. - Whether you have more expensive debt. Credit cards and personal loans almost always cost more than a mortgage, and they come first. There is a fourth check that is less about arithmetic: keep an emergency fund. Money paid into a mortgage is hard to get back out, and a household with no cash buffer and a smaller mortgage is not obviously in a better position. ### Overpay or invest? The honest comparison is against a risk-free return, not against a hoped-for one. Overpaying a mortgage produces a guaranteed return equal to your mortgage rate, tax-free in most jurisdictions. An investment expected to beat that carries risk, and the difference in expected return is the payment for taking it. | Mortgage rate high relative to safe returns | Overpay | | Employer pension matching available | Pension first — the match is an immediate return | | Tax-advantaged investment account unused | Often investing, depending on the rate | | No emergency fund | Neither — build the buffer first | | Expensive short-term debt outstanding | Clear that first | | Approaching retirement with a mortgage | Overpay — a cleared mortgage lowers required income | There is also a non-financial factor that people are strangely reluctant to name: a smaller debt is easier to live with. That is a legitimate input to the decision. ### Making it automatic - Set a standing order for the overpayment rather than deciding each month. - Choose an amount you will not resent — consistency beats size. - Increase it when a debt clears or after a pay rise, before the money is absorbed. - Check the annual statement to confirm it is reducing the term, not the payment. - Review the allowance if you are approaching ten per cent of the balance in a year. The reason to automate is behavioural rather than financial. An overpayment that requires a monthly decision is an overpayment that stops in a busy month and does not restart. Q: Is it worth overpaying my mortgage? A: For most households, yes — it produces a guaranteed return equal to your mortgage rate, and because interest is charged on the outstanding balance, an amount removed today saves interest for every remaining month. A modest regular overpayment can take several years off a twenty-five-year term. Three checks first: that the overpayment is within your penalty-free allowance, that you have no more expensive debt, and that you have an emergency fund, because money paid into a mortgage is hard to retrieve. Q: Should an overpayment reduce the term or the monthly payment? A: The term, in almost every case — that is where the large saving lives. Reducing the term keeps your payment the same and finishes the loan sooner; reducing the payment lowers your monthly cost but leaves the term untouched and saves far less. Many lenders apply payment reduction by default without mentioning it, so ask explicitly for term reduction and check the next annual statement to confirm it was applied. Q: Is it better to overpay the mortgage or invest the money? A: Compare against a risk-free return rather than a hoped-for one. Overpaying gives a guaranteed return equal to your mortgage rate, tax-free in most jurisdictions; beating it requires taking risk. Employer pension matching normally comes first because the match is an immediate return no investment matches. If you have no emergency fund, neither option comes first — build the buffer. And a smaller debt is easier to live with, which is a legitimate input rather than a soft one. ## When Refinancing Is Worth It: The Break-Even Calculation https://mortgagecalculator.siten.co/guides/when-to-refinance-a-mortgage Updated 2026-08-08 · Refinancing and overpaying - One calculation decides it: total switching cost divided by monthly saving equals the break-even in months. - The strongest case is the end of a fixed period, when the exit charge has gone and the reversion rate is waiting. - Check your current LTV — payments plus price growth may have moved you into a better band without you noticing. - Reducing the payment by extending the term is a deferral with interest attached, not a saving. - Get the existing lender’s retention offer first, then compare it on total cost over the new fixed period. There is one calculation and it takes two minutes. Add up everything switching costs. Divide by the monthly saving. That is the number of months you must stay for the switch to be worth doing. Everything else — rate speculation, lender loyalty, the feeling that you ought to be doing something — is noise around that fraction. ### The break-even sum Total cost of switching, divided by monthly saving, equals the break-even in months. If you will plausibly still hold the mortgage well past that point, refinance. If not, do not. | Early repayment charge on the current loan | 1,800 | | New arrangement fee | 995 | | Valuation and legal | 400 | | Total cost | 3,195 | | Current payment | 1,420 | | New payment | 1,255 | | Monthly saving | 165 | | Break-even | About 20 months | Twenty months is a reasonable switch if you intend to stay for five years and a poor one if you are selling next summer. That is the whole decision. ### The four cases where refinancing usually pays - Your fixed period is ending. The reversion rate is normally much higher, the early repayment charge has expired, and doing nothing is the expensive option. - Your LTV has crossed a band. Payments plus price growth may have moved you from 85 per cent to below 80, which is a genuinely better rate band on the whole balance. - Rates have fallen materially since you fixed and the exit charge is small or gone. - Your circumstances have improved — debt cleared, income evidenced differently, a poor credit event now old enough to have dropped off. The second case is the one people never check. Ask for a valuation or check comparable sales before assuming your LTV is what it was at purchase. ### The four cases where it usually does not - A large early repayment charge with a short remaining fix. Wait for the charge to fall or expire; it usually steps down annually. - You plan to move within the break-even period. Ask about porting instead. - Your circumstances have worsened — a job change, new self-employment, a debt taken on. A refinance is a full new application and can be declined. - The saving is small and you are extending the term to produce it. That is not a saving, it is a deferral with interest attached. The last case deserves care. Refinancing to a new twenty-five-year term at a lower rate can reduce the payment and increase the total cost. Compare total cost, not the monthly figure. ### Refinancing to release equity Borrowing more against the property to fund something else — a renovation, consolidating debt, a large purchase — is a separate decision that happens to use the same mechanism. It converts short-term debt into secured, long-term debt, which lowers the interest rate and lengthens the payment period dramatically. - Consolidating a five-year loan into a twenty-year mortgage can cost more in total despite the lower rate. - The debt becomes secured on your home, which changes the consequence of not paying it. - Renovation borrowing can be sound where it adds value or is unavoidable; check whether the property will support the new LTV. - Releasing equity reduces your equity buffer, which matters if prices fall. The lower rate is real and the longer term is also real. Run both totals before deciding, and be honest about whether the underlying spending habit is also being addressed. ### The process, and how long it takes - Start three to six months before your fixed period ends — offers are usually valid for months, so an early offer costs nothing. - Get your current lender’s retention offer first; it is often competitive and requires almost no paperwork. - Compare it against the open market on total cost over the new fixed period, including fees. - Check your current LTV, because it may have improved and moved you into a better band. - Apply, expecting a full assessment: income, commitments and a valuation. - Complete before the reversion rate starts, not after. Step two is worth doing properly. A retention offer avoids legal work and valuation entirely, and the convenience is worth something real — but it is a starting point rather than a final answer. Q: When is it worth refinancing a mortgage? A: When the total cost of switching divided by the monthly saving gives a break-even period comfortably shorter than the time you will keep the mortgage. Add the early repayment charge, the new arrangement fee, valuation and legal costs; divide by the saving. Twenty months is fine if you are staying five years and poor if you are selling next year. The strongest case is the end of a fixed period, when the exit charge has expired and doing nothing means moving to a much higher reversion rate. Q: Does refinancing hurt my credit score? A: It causes a temporary dip and is not a lasting problem. A refinance is a full new mortgage application, so it involves a hard credit search and, briefly, a new account alongside the old one. Both effects fade within months. What does matter is timing: avoid applying for other credit in the same period, since several applications in a short window look worse than one. Q: Should I refinance to consolidate other debts? A: Sometimes, and carefully. Moving a personal loan onto a mortgage cuts the interest rate but stretches the repayment over twenty years or more, so the total paid can rise even at the lower rate — and the debt becomes secured on your home, which changes what happens if you cannot pay. It can be the right decision when the alternative is expensive short-term credit, provided you compare total cost rather than monthly payment and address whatever produced the debt. ## First-Time Buyer Mortgages: The Schemes, and the Catches https://mortgagecalculator.siten.co/guides/first-time-buyer-mortgages Updated 2026-08-08 · Mortgage types - The barrier to a first purchase is the lump sum — deposit plus taxes plus fees — not usually the monthly payment. - High-LTV products, state guarantees, tax reliefs, shared ownership and guarantor arrangements each cost something specific. - Small deposits build equity slowly, which is what makes a modest price fall a remortgaging problem. - Always compare the scheme product against a plain product at the same LTV; the scheme is not automatically cheaper. - An honest rent-versus-buy comparison includes maintenance, transaction costs and how long you will actually stay. Every market has a set of arrangements aimed at people buying their first home, and they all solve the same problem: the deposit and the taxes are the barrier, not the monthly payment. They also all have a cost, and the cost is rarely on the front of the leaflet. It is usually a higher rate, a slower path to equity, or a constraint on what you can do later. ### What actually blocks a first purchase Worth naming, because the schemes are designed around it. For most first-time buyers the monthly payment is affordable — often lower than the rent they are already paying — and the obstacle is the lump sum: deposit, plus transfer tax, plus fees, all of it in cash on one day. - The deposit, which grows as prices grow, so saving chases a moving target. - Purchase taxes, which are cash and cannot be borrowed. - Legal and lender fees, which are small individually and add up. - Furnishing and immediate repairs, which nobody budgets and everybody pays. - In several markets, the higher rate charged at high loan-to-value, which makes the payment worse exactly when the deposit is smallest. ### The common scheme types | High-LTV product (95%) | Buy with a small deposit | Highest rate band; slow equity build | | State guarantee | Lender protected, so high-LTV lending exists | Usually a rate premium; eligibility rules | | Tax reduction or exemption | Cuts the cash needed at completion | Price caps and residence conditions | | Shared ownership | Buy a share, rent the rest | Rent plus service charge; harder resale | | Family guarantor or deposit | Family income or savings support the application | Real risk transferred to the family member | | Subsidised savings account | Bonus on money saved for a deposit | Contribution limits and a waiting period | Schemes change frequently — they are policy instruments and they appear, tighten and end with budgets. Check the current rules with the national body rather than an article, including this one. ### The catches, stated plainly - High-LTV rates are genuinely higher, and the difference applies to the whole loan for the whole product period. - Small deposits build equity slowly, so a modest price fall can put you in negative equity and unable to remortgage. - Price caps on tax reliefs and schemes distort what you look at, and can push buyers to the edge of the cap. - Shared ownership combines a mortgage with rent and a service charge, and resale is often slower and more restricted. - Guarantor arrangements move real risk onto a family member — often a parent’s home or savings. - Newbuild premiums matter because many schemes are only available on newbuild, which can be priced above the resale market. None of these makes the schemes wrong. They make the comparison a real comparison rather than a leaflet. ### What to do first - Calculate the full cash requirement in your market: deposit, transfer tax, notary and legal, lender fees, moving. - Check which LTV band your realistic deposit reaches, and what the next band would cost to reach. - Find the current national scheme rules from the government or regulator, not from an article. - Get an affordability view from a broker before falling in love with a property. - Clean up short-term debt and unused credit limits three to six months ahead. - Compare the scheme product against the plain product at the same LTV — sometimes the scheme is not the cheaper route. Step six is the one most often skipped. A guarantee scheme that costs half a point more than an ordinary 90 per cent product is worth taking only if you cannot reach 90 per cent. ### The rent comparison, done honestly Buying is often compared with renting on the monthly figure alone, which flatters buying. An honest comparison includes the things a tenant does not pay: maintenance and repairs, buildings insurance, service charges where they apply, purchase and eventual selling costs spread over how long you will actually stay, and the interest itself, which is the cost of the money rather than a payment into an asset. - Maintenance is commonly budgeted at around one per cent of the property value a year. - Purchase and sale costs together can consume several years of any price growth. - The capital portion of the payment is saving; the interest portion is a cost, like rent. - Staying under about five years rarely recovers the transaction costs. - Owning removes rent increases, which is a genuine long-term advantage the monthly comparison hides. The honest summary is that buying usually wins over a long horizon and frequently loses over a short one, and the transaction costs are what decide where the line sits. Q: How much deposit does a first-time buyer need? A: It depends far more on the market than on being a first-time buyer. Five per cent products exist in the United Kingdom and elsewhere, ten per cent is a common practical minimum, and the Netherlands still permits borrowing the full price — while Germany and Spain expect around twenty per cent and add purchase costs of a tenth of the price on top. The number that matters is total cash needed at completion, not the deposit percentage alone. Q: Are first-time buyer schemes worth it? A: Sometimes, and the test is a direct comparison rather than the leaflet. Compare the scheme product against an ordinary product at the same loan-to-value. If you could reach the ordinary product with the deposit you have, the scheme frequently costs more in rate than it saves elsewhere. If the scheme is what makes the purchase possible at all, that is a different question — but check the resale restrictions, the price caps and, for shared ownership, the rent and service charge alongside the mortgage. Q: Is it better to rent or to buy? A: Over a long horizon buying usually wins, over a short one it frequently loses, and transaction costs decide where the line falls. An honest comparison adds what a tenant does not pay: maintenance at roughly one per cent of the value a year, buildings insurance, service charges, and the purchase and eventual sale costs spread across how long you actually stay. Under about five years those costs rarely recover. The genuine long-term advantage of owning is that the payment stops rising while rent does not. ## Mortgages Around the World: Why Advice Does Not Translate https://mortgagecalculator.siten.co/guides/mortgage-types-by-country Updated 2026-08-08 · Mortgage types - The default American mortgage — thirty years fixed, free to repay early — exists in almost no other market. - Four things vary: how long the rate is fixed, whether early repayment is penalised, how much cash is needed, and what the state adds. - Purchase taxes and fees are the bigger surprise: they can exceed an entire British deposit in Germany or Spain. - States add tax relief, mandatory amortisation, DTI caps and compulsory insurance, all of which change the real cost. - If buying abroad, match the loan currency to your income currency and take advice regulated where the property is. Most mortgage advice on the internet is American, and most of the people reading it are not. That would be harmless if the products were similar. They are not: the default American mortgage — thirty years, fixed for the whole term, repayable early without penalty — exists in almost no other market, and reasoning from it produces confident, wrong conclusions everywhere else. Here is what actually varies, and why it matters if you are comparing across borders. ### The four things that differ - How long the rate is fixed for, which ranges from the whole term to two years. - Whether early repayment is free, which is standard in some markets and penalised in others. - How much of the price you must find in cash, counting taxes as well as deposit. - What the state adds — insurance requirements, tax relief, amortisation rules and first-time buyer schemes. Any one of these can outweigh a difference in the headline rate. Comparing rates between countries without them is comparing nothing. ### Rate fixing by market | United States | 30 years | 30 years | Normally free | | France | Whole term | 20–25 years | Capped penalty by law | | Netherlands | 10–30 years | 30 years | Free within limits | | Germany | 10–15 years | 25–35 years | Penalty within the fixed period | | United Kingdom | 2–5 years | 25–40 years | Penalty within the fix, free after | | Sweden | 3 months – 5 years | Up to 50 years | Penalty on fixed portions | | Spain, Portugal, Italy | Mixed fixed and variable | 25–40 years | Capped by EU rules | | Poland | Short fixings or variable | 25–35 years | Limited penalty | | India, Türkiye | Floating; monthly quoting in Türkiye | 10–30 years | Varies | Look at the second and third columns together. A British borrower with a five-year fix on a thirty-year term faces the market five or six times; a French borrower with a whole-term fix faces it once. ### Cash needed, which is the bigger surprise The deposit is only part of it. Transaction taxes and statutory fees vary enormously and are almost never lendable, so the cash requirement at completion can differ by a factor of five between markets at the same price. | Netherlands | 0–10% | 2–4% | Low | | United Kingdom | 10% | 2–4% | Moderate | | United States | 20% (or much less on some programmes) | 3–5% | Moderate | | Portugal | 10% | 6–8% | High | | Spain | 20% | 10–12% | High | | Germany | 20% | 9–12% | Very high | | Italy | 20% | 5–8% | High | Indicative ranges that vary by region and property. The German and Spanish figures are the ones that catch international buyers: the purchase costs alone can exceed a British deposit. ### What the state adds - Mortgage interest tax relief — the Netherlands is the best-known case; it lowers the net cost of interest substantially. - Mandatory amortisation — Sweden requires minimum capital repayment scaled to LTV, which raises the monthly figure directly. - Regulatory DTI caps — France caps total debt service around 35 per cent including insurance. - Compulsory borrower insurance, priced into the offer in France and several other markets. - First-time buyer schemes — guarantees, subsidised rates or tax reductions, which appear and disappear with policy cycles. - Regionally set transfer taxes, which differ within a single country in Spain, Germany and India. The last point deserves emphasis: in several countries the answer to what is the purchase tax is which region, which is why our per-market defaults are labelled indicative. ### If you are buying abroad - Find out the cash requirement first: deposit plus taxes plus fees, in that market, for a non-resident. - Check whether non-residents face a higher deposit requirement — they usually do. - Establish which currency your income is in and which the loan is in; a mismatch is a real risk, not a technicality. - Check whether early repayment is penalised, since exit plans matter more when you are abroad. - Get advice from someone regulated in the country where the property is, not where you live. - Assume nothing transfers from your home market — including the meaning of the word fixed. The currency point is the one that has caused the most damage historically. A loan in a currency you do not earn in adds an exchange rate to a twenty-five-year commitment. Q: Why are mortgages so different between countries? A: Because they are shaped by national law, tax policy and banking structure rather than by an international standard. Whether the rate can be fixed for thirty years depends on how lenders fund themselves; whether early repayment is free depends on statute; the cash you need depends on transfer taxes set nationally or regionally; and states add their own layers through tax relief, insurance requirements and amortisation rules. The result is that the same word — a fixed-rate mortgage — describes very different products in different markets. Q: Which country has the best mortgage terms? A: There is no single answer, because the components trade off against each other. The United States offers thirty-year fixes with free early repayment, which is unusually borrower-friendly on rate risk. The Netherlands offers long fixes, high loan-to-value lending and interest tax relief, but house prices are high. Germany offers long fixes and stable pricing with very high purchase costs. Sweden offers long terms but adds a mandatory amortisation requirement. The right comparison is total cash needed plus total cost over your realistic horizon. Q: Can I get a mortgage in a country where I do not live? A: Often yes, with a larger deposit — non-residents commonly face requirements ten to twenty points higher — and a longer process. Two things matter more than the rate. First, whether your income currency matches the loan currency, because a mismatch adds exchange rate risk to a decades-long commitment. Second, whether early repayment is penalised, since plans change more often when the property is abroad. Take advice from someone regulated where the property is. ## Repayment or Interest-Only? What You Owe at the End https://mortgagecalculator.siten.co/guides/repayment-vs-interest-only-mortgage Updated 2026-08-07 · Mortgage types - Interest-only does not reduce the balance at all: at the end of the term you owe exactly what you borrowed. - Because interest is charged on the full balance throughout, an interest-only loan costs much more in total. - It suits buy-to-let, evidenced repayment vehicles and planned downsizing — not making an expensive house affordable. - Part-and-part gives most of the payment relief with a bounded end-of-term balance and is underused. - If there is no specific answer to what repays the capital, the product is not suitable. The difference is not subtle and it is regularly mis-sold as a matter of monthly affordability. A repayment mortgage clears the loan over the term. An interest-only mortgage does not reduce the balance at all — at the end of twenty-five years you owe exactly what you borrowed on day one. That is not automatically a bad arrangement. It is a bad arrangement without a credible plan for the balance, which is what went wrong on a large scale in several markets. ### The two structures side by side | Monthly payment | Higher | Lower | | Balance after 10 years | Reduced substantially | Unchanged | | Balance at end of term | Zero | The full original amount | | Total interest paid | Lower | Higher — interest is charged on the full balance throughout | | Who it suits | Almost everyone buying a home | Specific cases with a repayment vehicle | | Main risk | Payment size | Having no way to repay the capital | The total interest line is the one people miss. Because the balance never falls, interest is charged on the full amount every month for the whole term — an interest-only loan costs more in total despite costing less each month. ### The arithmetic Borrow 200,000 at 4.8% over 25 years. On repayment, the monthly payment is about 1,146 and total interest is roughly 143,800; at the end you own the house outright. On interest-only, the payment is 800 — the interest alone — total interest is 240,000, and at the end you still owe the 200,000. - Monthly saving on interest-only: about 346, or thirty per cent of the payment. - Extra total interest: roughly 96,000 over the term. - Outstanding at the end: 200,000, which must come from somewhere. - The saving is real and the cost of it arrives all at once, twenty-five years later. ### Who interest-only genuinely suits There are legitimate cases, and they share a feature: a credible, evidenced plan for repaying the capital that does not depend on hoping. - Buy-to-let investors, where the rent covers interest and the property is expected to be sold or refinanced. - Borrowers with a genuine repayment vehicle — an investment portfolio, a pension lump sum, a maturing policy — that the lender will assess. - Borrowers expecting to downsize, with enough equity that the sale plainly covers the balance. - Very high or lumpy incomes where the capital is repaid in irregular lump sums. - Short-term bridging situations, where the loan is explicitly temporary. Notice what is not on this list: making an expensive house affordable. That is the use case that produced the mis-selling scandals, and lenders in most regulated markets now require the repayment plan to be evidenced at application. ### The part-and-part option Splitting the loan — part repayment, part interest-only — is available in several markets and is underused. It reduces the payment relative to full repayment while guaranteeing that a defined portion of the debt is cleared regardless of what happens to the plan for the rest. | Full repayment | About 1,146 | 0 | | 75% repayment, 25% interest-only | About 1,059 | 50,000 | | 50/50 | About 973 | 100,000 | | Full interest-only | 800 | 200,000 | Illustrative, 4.8% over 25 years. The middle rows are the honest compromise: real payment relief, bounded end-of-term exposure. ### Questions to ask before choosing interest-only - What exactly repays the capital, and what happens if it underperforms? - Will the lender accept that vehicle as evidence, and how often will it be reviewed? - What is the total interest over the term, compared with repayment? - Could you switch to repayment later, and what would the payment become? - If the plan is to sell, what fall in property prices would break it? - Would part-and-part achieve most of the payment relief with far less risk? If question one has no specific answer, the product is not suitable, however attractive the monthly figure looks. Q: What is the difference between repayment and interest-only? A: A repayment mortgage clears the loan over the term: each payment covers the interest and reduces the balance, so at the end you owe nothing. An interest-only mortgage pays the interest alone, so the balance never falls — at the end of the term you still owe exactly what you borrowed and must repay it in one lump. The monthly payment is lower, but the total interest is much higher, because interest is charged on the full balance for the whole term. Q: Is an interest-only mortgage a bad idea? A: Not inherently — it is a bad idea without a credible plan for repaying the capital. It works for buy-to-let investors expecting to sell or refinance, for borrowers with an evidenced repayment vehicle such as an investment portfolio or a pension lump sum, and for people who plan to downsize with substantial equity. It fails when it is used simply to make an expensive property affordable, which is what produced the mis-selling problems in several markets and why lenders now require the repayment plan to be evidenced. Q: Can I switch from interest-only to repayment? A: Usually yes, and most lenders will accommodate it because it reduces their risk. The payment will rise substantially, and the rise is steeper the later you switch, because the same capital has to be cleared over fewer remaining years. Some lenders allow a partial switch — converting part of the balance to repayment — which is a practical middle step if the full payment would be uncomfortable. ## Debt to Income: The Ratio That Decides More Applications Than Salary https://mortgagecalculator.siten.co/guides/debt-to-income-ratio-explained Updated 2026-08-07 · Affordability and deposit - DTI is monthly debt payments over gross monthly income, and it includes the mortgage you are applying for. - In several markets it is a regulatory cap rather than a guideline, so an appeal on affordability grounds does not work. - Unused credit card limits and guarantees on someone else’s borrowing are the two that catch people out. - Clearing the smallest instalment loan outright moves the ratio more than partially paying down a larger one. - Extending the term improves the ratio by making the loan more expensive overall — a real trade-off, not a trick. Salary gets the attention and debt-to-income does the deciding. It is a single fraction — your monthly debt payments over your gross monthly income — and in several markets it is not merely a guideline but a regulatory cap the lender cannot exceed. The useful thing about a ratio is that it has two ends. Most people try to move the one that is hard to change. ### The calculation Add up every monthly debt payment, including the proposed mortgage. Divide by gross monthly income. That is the ratio. Some markets use a front-end version — housing costs only — alongside the total, and the housing-only figure is usually capped lower. - Numerator: proposed mortgage payment, plus any other loans, car finance, credit card minimums, student loan payments and maintenance obligations. - Denominator: gross monthly income, before tax, with irregular components averaged or discounted. - Front-end ratio: housing costs alone over income, where the market uses one. - Back-end ratio: all debt over income — the figure usually referred to as DTI. The proposed mortgage payment is in the numerator, which is what makes this a constraint rather than a description: the more you want to borrow, the worse your own ratio becomes. ### Where the caps sit | United States | 43% typical, higher with compensating factors | Rules differ by loan programme | | France | 35% including borrower insurance | A regulatory cap with a limited exception quota | | United Kingdom | No fixed DTI cap; income multiple plus stress test | Loan-to-income limits apply at portfolio level | | Netherlands, Nordics | Income-based norms plus amortisation rules | Set by regulator, updated periodically | | India | Commonly around 40–50% | Varies by lender and income level | Where a regulator sets the cap, the lender genuinely cannot lend beyond it for most of its book — which is why an appeal on the grounds that you could clearly afford it does not work. ### What counts as debt - Every instalment loan payment: car finance, personal loans, furniture credit. - Credit card minimum payments — and with some lenders, a percentage of the limit even at zero balance. - Student loan payments where they are contractual rather than income-contingent. - Maintenance and child support obligations. - Guarantees you have given on someone else’s borrowing. - Buy-now-pay-later commitments, increasingly visible on credit files. Two of these surprise people every time: an unused credit card limit, and being a guarantor for a relative. Both can be removed relatively quickly if you know to look. ### Moving the ratio Both ends can move, but at very different speeds. Reducing the numerator is fast and within your control; increasing the denominator usually is not. - Clear the smallest instalment loan outright — it removes the whole monthly payment, which is what the ratio counts. - Reduce or close unused credit card limits, several months ahead so the file updates. - Avoid taking new credit in the six months before applying, including phone contracts financed as credit. - Consider a longer mortgage term: it lowers the monthly payment and therefore the ratio, at the cost of more total interest. - Increase the deposit, which reduces the loan and the payment together. - Where the income is joint, check whether applying alone changes which cap binds. Step four is a genuine trade-off rather than a trick. It improves the ratio by making the loan more expensive overall, and it is the right answer only if the alternative is not buying. ### Why lenders use it at all It is the best available single predictor of whether payments will actually be made. Income tells you what arrives; DTI tells you what is already spoken for. A household spending half its gross income on debt has very little room for a rate rise, a repair or a lost month of work — and lenders and regulators both learned in 2008 what happens when that buffer is missing at scale. That framing is worth adopting rather than resisting. The ratio is not an obstacle between you and a house; it is a rough measure of how much slack the household has, and it is worth knowing your own answer independently of what a lender says. Q: What is a good debt-to-income ratio for a mortgage? A: Below about 35 per cent including the proposed mortgage is comfortable almost everywhere; below 43 per cent is the common working limit in the United States; France applies a regulatory cap around 35 per cent including borrower insurance. Lower is always better and widens the lender choice as well as improving the rate band you can reach. The figure counts the mortgage you are applying for, so the more you want to borrow the worse your own ratio becomes. Q: What counts as debt in a DTI calculation? A: Every contractual monthly payment: instalment loans, car finance, credit card minimums, contractual student loan payments, maintenance and child support, and any borrowing you have guaranteed for someone else. Some lenders also count a percentage of an unused credit card limit as potential debt. The two that catch people out are exactly those — an old card with a large limit and a zero balance, and being a guarantor for a relative. Q: How can I improve my debt-to-income ratio quickly? A: Work on the numerator, which is the end you control. Clearing the smallest instalment loan outright removes its whole monthly payment, which is what the ratio counts — paying half of it down helps much less. Close or reduce unused credit card limits, allowing a few months for the credit file to update. Avoid taking any new credit in the six months before applying. Extending the mortgage term also lowers the ratio, but at a real cost in total interest. ## Deposit and LTV: Why the Bands Matter More Than the Amount https://mortgagecalculator.siten.co/guides/deposit-and-loan-to-value-explained Updated 2026-08-07 · Affordability and deposit - Deposit does two separate things: it reduces the loan linearly and it can move you into a better LTV band in a step. - Common thresholds are 90, 80, 75 and 60 per cent; stopping just short of one is the most avoidable mistake in a purchase. - Above roughly 80 per cent, mortgage insurance applies in several markets — a real monthly cost with no benefit to the borrower. - Lenders verify the source of the deposit, and a gifted deposit needs a signed letter prepared in advance. - Purchase taxes and fees are cash on top of the deposit and cannot normally be borrowed. The deposit does two things, and only one of them is obvious. It reduces the amount you borrow, which reduces the payment proportionally. And it moves you into a different loan-to-value band, which changes the rate you are offered on the whole loan. The second effect is lumpy rather than smooth, and that is what makes it exploitable: a small extra amount that crosses a threshold can be worth far more than a much larger amount that does not. ### How the bands work Lenders do not price continuously. They publish a product range with rates for LTV bands, and the common thresholds cluster at recognisable numbers. Sitting at 80.4 per cent and sitting at 79.9 per cent are almost the same loan and frequently not the same rate. | 95% | 5% | Highest rates, limited product choice | | 90% | 10% | Materially better than 95% | | 85% | 15% | Better again | | 80% | 20% | A major threshold; removes mortgage insurance in some markets | | 75% | 25% | Close to best pricing | | 60% and below | 40%+ | Best available rates | The exact thresholds vary by lender and market, but 90, 80, 75 and 60 recur almost everywhere. Ask your lender or broker for the specific bands before deciding how much deposit to put in. ### The two mechanisms, separated Worth seeing side by side, because they are often conflated and they behave differently. Adding deposit always reduces the loan. It only sometimes changes the rate — but when it does, the effect applies to the entire remaining balance for the whole product period. - Reducing the loan is linear: 10,000 less borrowed is roughly 55 less per month at 5% over 25 years. - Crossing a band is a step: it can lower the rate on the whole loan by a quarter or half a point. - On a 250,000 loan, half a point is roughly 70 per month — from a deposit change that might have been 5,000. - Below the threshold, additional deposit only does the linear thing until the next band. The practical rule: find out where the next band sits before deciding what to put in. Stopping just short of one is the most common avoidable mistake in a purchase. ### Mortgage insurance and the 80 per cent line In several markets, lending above a threshold — commonly 80 per cent — requires insurance that protects the lender and is paid by the borrower. It is a real monthly cost with no benefit to you, and it usually falls away once the balance drops below the threshold, though the mechanism for that varies. - In the United States, private mortgage insurance applies above 80 per cent LTV on conventional loans. - It is normally cancellable once the balance falls below the threshold, but the process differs and is not always automatic. - Several European markets use a lender-paid equivalent that appears in the rate rather than as a separate line. - Our calculator adds it automatically on the markets where it applies, because leaving it out understates the payment substantially. If you are close to the threshold, this is the sharpest argument for finding the extra deposit — you are removing a cost, not just reducing a balance. ### Where the deposit comes from Lenders verify the source of the deposit as a matter of routine, and the answer changes what is required from you. Gifts in particular need documentation that people rarely have ready. | Savings | Yes | Statements showing accumulation | | Gift from family | Yes | A signed letter confirming it is a gift, not a loan | | Sale of a previous property | Yes | Completion statement | | Inheritance | Yes | Probate documentation | | A personal loan | Almost never | It would be counted as debt anyway | | Cryptocurrency | Sometimes | Full transaction trail; several lenders decline | Start the gift letter early. It is a five-minute document that regularly delays completions by a week because nobody asked for it until the underwriter did. ### Deposit is not the only cash you need In many markets the purchase taxes and fees are larger than people budget for and cannot be borrowed. In Germany they routinely add close to a tenth of the price; in Spain and Portugal the transfer tax alone can be six to eight per cent. That money has to be liquid on completion day, alongside the deposit. - Purchase or transfer tax — the largest line in most European markets. - Notary and registry costs, statutory in several countries. - Agent commission, paid by the buyer in some markets. - Lender and legal fees. - Moving costs and immediate repairs, which nobody plans for. Our per-market calculator adds these to the cash-needed figure for exactly this reason. A deposit that leaves nothing for the transfer tax does not buy a house. Q: What is a good deposit for a mortgage? A: Enough to cross the next loan-to-value band, which is a more useful target than a round percentage. Rates are priced in bands — commonly at 90, 80, 75 and 60 per cent — so a small extra amount that takes you from just above a threshold to just below it can lower the rate on the whole loan, while a much larger amount that does not cross one only reduces the balance. Twenty per cent is the most consequential single threshold, because it also removes mortgage insurance in the markets that use it. Q: What does LTV mean? A: Loan to value: the loan expressed as a percentage of the property value. A 250,000 loan on a 300,000 property is an LTV of about 83 per cent. It is the main pricing lever a lender uses, because it measures how much of its money is at risk if prices fall, and it determines whether mortgage insurance applies. It is also the number that decides whether a fall in prices leaves you in negative equity. Q: Can I use a gifted deposit? A: In most markets yes, provided it is genuinely a gift and not a loan. Lenders require a signed letter from the giver confirming that the money is a gift, that no repayment is expected, and that they retain no interest in the property; they will also verify the giver’s identity and the source of the funds. Get that letter early — it is a short document that routinely delays completions because nobody prepares it until the underwriter asks. ## How Much Can I Borrow? What the Lender Is Actually Calculating https://mortgagecalculator.siten.co/guides/how-much-can-i-borrow Updated 2026-08-06 · Affordability and deposit - Lenders apply an income multiple, a debt-to-income cap, a full affordability assessment and an LTV cap, then offer the lowest. - The stress test checks the payment at a rate two to three points above the one offered, which is why affordable payments get refused. - Bonus, overtime, self-employment and rental income are counted partially or averaged; identical salaries produce different offers. - Existing debt payments are the biggest reducer — clearing a car loan can add tens of thousands to the figure. - Improving the answer is mostly about evidence and timing, over three to six months rather than a week. Everyone asks the question as though there is one answer. There is not, because lenders apply three separate tests and the binding one changes from applicant to applicant. Two people with identical salaries routinely get offers thousands apart, and the reason is almost never the salary. It is a car loan, a stress test, or the way the income is evidenced. ### The three tests A lender applies all of these and offers the lowest result. Knowing which one is binding for you tells you what would actually change the answer. - Income multiple. A cap on the loan as a multiple of gross annual income — commonly around four to four and a half times, with limited scope above. - Debt-to-income. Total monthly debt payments as a share of gross monthly income, capped by regulation in several markets. - Affordability assessment. A full budget: income minus committed spending, essential costs and dependants, tested against the payment. - Loan to value. A separate cap based on the property, not on you — it limits the loan regardless of income. If the multiple binds, you need more income. If DTI binds, clearing a loan helps enormously. If affordability binds, reducing regular outgoings helps. They are not interchangeable. ### The stress test The payment that matters is not the one at the offered rate. Regulators in most markets require lenders to check that the borrower could still pay at a materially higher rate — commonly two to three percentage points above, or above a reversion rate. That is why a payment you can plainly afford can still be refused. | 150,000 | 834 | 1,109 | +33% | | 250,000 | 1,389 | 1,848 | +33% | | 350,000 | 1,945 | 2,587 | +33% | | 500,000 | 2,779 | 3,696 | +33% | Illustrative, 25-year term. The stress uplift is roughly a third at these levels, and it is applied to the payment you must be shown to afford — not the one you will pay. ### What counts as income, and what does not | Basic salary | In full | The straightforward case | | Regular overtime | Partly, often 50% | Needs a history | | Bonus | Partly, averaged | Two to three years of evidence usually required | | Self-employed profit | Yes | Two to three years of accounts; averaged, or the lower year | | Rental income | Partly | Often discounted for voids and costs | | Benefits and allowances | Varies widely | Highly lender-specific | | Second job | Often, with history | Needs to look durable | This is where two identical salaries diverge. A salary of the same size delivered as basic pay and as basic-plus-bonus produces materially different offers. ### What reduces the figure - Existing debt payments — a car loan is the classic case, and clearing one can add many times its balance to the borrowing figure. - Credit card limits, which some lenders count as potential debt even at a zero balance. - Dependants, which increase the assumed essential spending. - Committed regular spending visible on statements — subscriptions, childcare, maintenance payments. - A short remaining working life, where the term would run past retirement age. - Irregular income, which is discounted before it is counted. The car loan point is worth restating because it is so consistently underestimated: a monthly payment of a couple of hundred can reduce borrowing capacity by tens of thousands. ### How to improve the answer - Clear or reduce short-term debt several months before applying, not the week before. - Reduce credit card limits you do not use. - Keep three to six months of clean statements: this period is what an underwriter reads. - Increase the deposit if you can, which lowers the LTV band as well as the loan. - Avoid changing job in the run-up, or apply after passing probation. - Have the evidence assembled — payslips, accounts, tax computations — before applying, not after being asked. None of this changes what you can genuinely afford. It changes whether the lender can see it, which is a different problem with a shorter timeline. Q: How much can I borrow for a mortgage? A: Lenders apply several tests and offer the lowest result: an income multiple, usually around four to four and a half times gross annual income; a debt-to-income cap, which is set by regulation in several markets; a full affordability assessment of your actual income minus committed spending; and a loan-to-value cap based on the property. Which one binds varies by applicant, and knowing which one it is tells you what would actually change the number. Q: Why is my mortgage offer lower than the online calculator said? A: Usually one of three things. Existing debt — a car loan or a credit card limit — has reduced the affordability figure, often by much more than people expect. Part of your income has been discounted: bonus, overtime, self-employed profit and rental income are all counted partially or averaged. Or the stress test has bitten, because the lender must check that you could pay at a rate two or three points above the one offered, not at the one offered. Q: Does paying off a car loan increase how much I can borrow? A: Often dramatically. Affordability is calculated from income minus committed payments, so removing a monthly obligation frees that amount for mortgage payments — and because the mortgage payment is capitalised over twenty-five or thirty years, a payment of a couple of hundred a month can be worth tens of thousands of borrowing capacity. Clear it several months before applying so the statements the underwriter reads are already clean. ## How Mortgage Interest Is Calculated, Month by Month https://mortgagecalculator.siten.co/guides/how-mortgage-interest-is-calculated Updated 2026-08-06 · Rates and costs - Interest is charged on the balance outstanding, and every counterintuitive feature of mortgages follows from that. - The payment is constant but the split shifts: interest dominates early, capital dominates late. - Daily, monthly and annual rest change when an overpayment starts working for you. - Dividing the annual nominal rate by twelve is a convention, not a compounding calculation — which is why three percentages can describe one loan. - Overpay early, and ask whether the overpayment reduces the term or the payment; the term saves more. Here is the sentence that explains almost everything about mortgage interest: it is charged on the balance outstanding, not on the amount you originally borrowed. Every counterintuitive thing about mortgages follows from it. Why the early years feel like nothing is happening. Why an overpayment in year two saves several times what the same amount saves in year twenty. Why a longer term costs so much more in total while costing less each month. ### The monthly cycle Each month, three things happen in a fixed order. The lender calculates interest on the balance. Your payment arrives. Whatever is left of the payment after the interest reduces the balance. Then the cycle repeats against a slightly smaller number. - Interest for the month equals the balance multiplied by the monthly rate. - The payment is applied: first to the interest, then to the capital. - The balance falls by the capital portion. - Next month’s interest is charged on the new, smaller balance. Because the balance falls slowly at first, so does the interest charge — which is why progress feels invisible in the early years and accelerates later. ### A worked month Balance 200,000, nominal rate 4.8%, so the monthly rate is 0.4%. Interest for the month is 800. If the payment is 1,146, then 346 reduces the balance, leaving 199,654. Next month the interest is 798.62 and 347.38 goes to capital. The shift is small each month and relentless over three hundred of them. | 1 | 200,000 | 800.00 | 346.00 | | 2 | 199,654 | 798.62 | 347.38 | | 60 | 174,900 | 699.60 | 446.40 | | 180 | 118,400 | 473.60 | 672.40 | | 300 | 1,141 | 4.56 | 1,141.00 | Illustrative figures rounded for readability. The pattern rather than the decimals is the point. ### Annual, monthly and daily interest Markets differ in how the charge is applied within the year, and the difference is small but real. Monthly rest — recalculating the balance monthly — is the most common. Daily rest applies interest on the actual balance each day, which makes overpayments effective immediately rather than at the next monthly point. Annual rest, once common, is now rare and is worse for the borrower. | Daily rest | Interest calculated on the balance each day | Overpayments count immediately | | Monthly rest | Balance recalculated monthly | Overpayments count at the next cycle | | Annual rest | Balance recalculated once a year | An overpayment can sit uncredited for months | If you plan to overpay regularly, ask which method the lender uses. On daily rest an overpayment starts saving the day it lands. ### Why the nominal rate is divided by twelve Dividing the annual nominal rate by twelve is a convention rather than a compounding calculation. A true monthly equivalent of a 4.8% annual effective rate would be slightly under 0.4%, because compounding twelve times produces slightly more than the annual figure. Lenders in most markets quote a nominal annual rate and divide it by twelve, and that is what our calculator does — with one exception. - Most markets quote a nominal annual rate; monthly rate equals it divided by twelve. - Turkish lenders quote a monthly rate directly, so the calculator uses it as given and shows the annual equivalent alongside. - The annual effective rate is always slightly higher than the nominal, because of compounding. - APR is calculated on the effective basis and includes fees, which is why it exceeds the nominal rate. This is why three different percentages can describe the same loan without any of them being wrong. Check which one you are looking at before comparing. ### What this means in practice - Overpay early if you overpay at all — the same amount removes interest from every remaining month. - A rate rise hurts most when the balance is largest, which is the start of the term. - Shortening the term saves more than reducing the payment when you overpay; ask the lender which they apply. - On daily rest, timing an overpayment before a monthly cycle is worth marginally more. - The total interest figure — not the monthly payment — is the number that shows what the term choice costs. Our calculator prints the year-by-year split for exactly this reason. The monthly payment is what you can afford; the interest column is what you are buying. Q: Is mortgage interest calculated on the original amount or the balance? A: On the balance outstanding. Each month the lender multiplies what you still owe by the monthly rate, and that is the interest for that month; the rest of your payment reduces the balance. Because the balance falls, the interest charge falls with it and the capital portion of a constant payment grows. This is the single fact that explains amortisation, why early years feel slow, and why an early overpayment is worth so much more than a late one. Q: What is daily interest on a mortgage? A: Daily rest means the lender calculates interest on the actual balance each day rather than on a balance fixed once a month or once a year. The practical difference is that an overpayment starts reducing your interest the day it arrives, instead of waiting for the next monthly recalculation. If you intend to overpay regularly, it is worth asking which method a lender uses before choosing a product. Q: Does overpaying my mortgage really save that much? A: Yes, and much more if you do it early. An overpayment removes that amount of balance from every single remaining month, so its saving compounds across the rest of the term — which is why the same sum overpaid in year two can save several times what it saves in year twenty. Two things to check: whether your lender allows the overpayment without an early repayment charge, and whether it reduces the term or the monthly payment. Reducing the term saves substantially more. ## APR and Fees: Why the Cheapest Rate Is Often the Expensive Deal https://mortgagecalculator.siten.co/guides/mortgage-apr-and-fees-explained Updated 2026-08-06 · Rates and costs - A fee is fixed and a rate saving is proportional, so large fees suit large loans and small loans suit fee-free products. - APR includes compulsory fees but assumes you keep the loan for the whole term, which is rarely true with short fixes. - For a short fixed period, compare the total cost over that period including fees — it often reverses the rate ranking. - Adding the arrangement fee to the loan is a small long-term loan at mortgage rates, not an administrative convenience. - Purchase taxes and statutory costs are usually larger than lender fees and cannot be borrowed. Two offers. One at 4.2% with a 2,000 fee, one at 4.5% with no fee. Which is cheaper? The answer depends entirely on how much you are borrowing and for how long, which is precisely why the headline rate cannot settle it and why the APR exists. It is also why the same pair of offers can rank differently for two different buyers, and why a comparison table that sorts on rate is actively misleading. ### What APR is APR — APRC in much of Europe — expresses the total cost of the credit, including compulsory fees, as a single annual percentage over the whole term. It exists specifically so that two offers with different fee structures can be compared with one number, and it is a regulatory requirement in most markets for that reason. - It includes the interest and the compulsory fees the lender charges. - It usually includes compulsory insurance where the lender requires it. - It assumes you keep the loan for the full term — which is the significant assumption. - It does not include third-party costs you would pay anyway: purchase taxes, notary, agent commission. - It cannot capture what a variable rate will do, so for variable products it is illustrative. The full-term assumption is the flaw. If you have a two-year fix inside a twenty-five year term, the APR spreads the fee over twenty-five years — but you will pay it again in two years when you remortgage. ### The arithmetic on fee versus rate The trade-off is straightforward once you write it down. A fee is a fixed amount; a rate difference is proportional to the balance. So a large fee is worth paying on a large loan and not on a small one — and the crossover point is easy to find. | 100,000 | About 300 | 1,000 per year | No fee | | 250,000 | About 750 | 1,000 per year | No fee, narrowly | | 400,000 | About 1,200 | 1,000 per year | Pay the fee | | 600,000 | About 1,800 | 1,000 per year | Pay the fee clearly | Rough figures on the balance rather than the exact amortised saving, which is enough to make the decision. The point is the shape: fees favour large loans, and the crossover is around a quarter to a third of a million on a two-year product. ### The fees you will meet | Arrangement / product fee | Lender | Sometimes addable to the loan — which means you pay interest on it | | Booking fee | Lender | Often non-refundable even if the application fails | | Valuation fee | Lender | Frequently waived as an incentive | | Legal fees | Conveyancer | Sometimes covered by the lender on remortgages | | Broker fee | Broker | Ask whether they are also paid by the lender | | Early repayment charge | Lender | Not a cost today; a cost if things change | | Exit / deeds release | Lender | Small, at the end | Adding the arrangement fee to the loan is offered as a convenience and is a small loan at mortgage rates for the full term. On a long fix it can double the effective cost of the fee. ### What APR misses, and what to compare instead For any product where the fixed period is shorter than the term, the useful comparison is the total cost over the fixed period rather than the APR over the term. It is a simple sum and it ranks offers correctly for the horizon you actually face. - Take the monthly payment at the offered rate, multiplied by the number of months in the fixed period. - Add every fee you will pay to get the product. - Subtract the balance reduction achieved over that period — a higher rate repays slightly less capital. - Compare that total between offers. - Then look at the reversion rate, because it tells you what happens if you do nothing at the end. This is what a good broker does and it is not complicated. It routinely reverses the ranking that a rate-sorted comparison table produces. ### Fees that are not the lender’s One more distinction worth holding onto: the lender’s fees are negotiable in effect — you can choose a different product — while purchase taxes and statutory costs are not. In several European markets the second group is far larger than the first, and it is cash rather than credit. - Property transfer tax or stamp duty — the largest upfront line in most European purchases. - Notary and registry costs, fixed by statute in France, Germany, Italy and elsewhere. - Estate agent commission, which the buyer pays in some markets and not others. - Survey costs, which are yours and are not the lender’s valuation. - Moving costs, which nobody budgets and everybody pays. Our calculator itemises these per market, because a rate comparison that ignores an eight per cent transfer tax is answering a much smaller question than the buyer is asking. Q: What is APR on a mortgage? A: APR — APRC in much of Europe — is the total cost of the credit expressed as a single annual percentage, including the interest and the compulsory fees, spread over the whole term. It exists so that two offers with different fee structures can be compared with one number, and it is a regulatory requirement in most markets. Its main limitation is that it assumes you keep the loan for the full term, which is rarely true where fixed periods are short. Q: Is a lower interest rate always the better deal? A: No. A fee is a fixed amount while a rate saving is proportional to the balance, so a low rate with a large arrangement fee is good value on a large loan and poor value on a small one. On a two-year product the crossover is usually somewhere between a quarter and a third of a million: below it the fee-free option normally wins, above it paying the fee normally wins. Compare the total cost over the fixed period, including fees, rather than the rate. Q: Should I add the arrangement fee to the loan? A: Only if you cannot pay it up front. Adding it means borrowing it at the mortgage rate for the remaining term, so on a long fix a two-thousand fee can end up costing considerably more than two thousand. It is offered as a convenience and priced like a small long-term loan. If cash is tight at completion it can still be the right call — just know that it is a financing decision, not an administrative one. ## Fixed or Variable? The Decision Is About Your Budget, Not the Market https://mortgagecalculator.siten.co/guides/fixed-vs-variable-mortgage-rates Updated 2026-08-05 · Rates and costs - The answerable question is not where rates are going but whether you could absorb a three-point rise. - Fixed period and term are different things, and in Britain they differ enormously while in France they often do not. - The reversion rate after a short fix is where most of the quiet cost sits — diarise the end of the fix. - Split loans, capped variables, drop-lock and offset products exist and are rarely advertised. - Compare APR and total cost over the fixed period before comparing monthly payments. Almost every article on this question tries to answer it by predicting interest rates. That is the wrong question, because nobody — including the people setting them — knows where rates will be in four years. The answerable question is different: what happens to your household if the payment rises by two or three percentage points? If the answer is uncomfortable rather than merely annoying, you are buying certainty, and the small premium a fixed rate carries is what certainty costs. ### What the two actually are A fixed rate is guaranteed for a stated period. A variable rate moves, either at the lender’s discretion or by tracking a published reference rate such as Euribor or a central bank policy rate. The critical detail is that the fixed period and the term are different things, and in several markets they are wildly different. | United States | 30 years | The whole term | | France, Netherlands | 20–30 years | Usually the whole term | | Germany | 10–15 years | A long window inside a longer term | | United Kingdom | 2–5 years | A short window inside a 25–40 year term | | Spain, Portugal, Italy | Fixed and variable both common | Varies by product | | Poland, Sweden | Short fixings or variable | Frequent repricing | A British five-year fix and a French twenty-five-year fix are both called fixed rates and are not the same product. This is why advice translated between markets is so often wrong. ### The reversion rate is the part that costs money Where the fixed period is shorter than the term, what happens at the end of it matters more than the headline. Most lenders move you onto a standard variable rate that is materially higher, and the cheapest short fixes are frequently the ones with the least attractive reversion. The workable habit is to treat the end of the fixed period as a diary entry, not a surprise: start looking three to six months before. - Note the reversion rate when you take the product, not when you reach it. - Diarise the end of the fixed period three to six months in advance. - Check the early repayment charge — it usually ends before the fix does, allowing a costless switch. - Remortgaging to a new product is normal, expected, and where most of the saving lives. ### The comparison that actually decides it | Could you absorb a 3-point rise? | No | Yes, comfortably | | Is the budget tight month to month? | Yes | No | | Might you repay early or move soon? | Only with a short fix | Yes — usually no exit penalty | | Is the rate difference large today? | No — certainty is cheap | Yes — the discount is real money | | Is your income variable? | Yes | No | | Do you have significant savings? | Not decisive | Yes — you can absorb movement | Note that two of these are about your circumstances and only one is about the market. That ratio is the honest one. ### The middle options The choice is not always binary. Several markets offer arrangements that split the difference, and they are worth asking about explicitly because they are rarely advertised. - Split loans — part fixed, part variable, which halves the exposure in both directions. - Capped variable — moves with the reference rate but cannot exceed a ceiling. - Drop-lock — a variable product with the contractual right to switch to a fix later. - Offset — savings reduce the balance interest is charged on, useful when you hold cash. - Short fix with no exit charge — certainty for the near term, freedom to move. A split loan is the underrated one. It is not a compromise so much as an acknowledgement that you do not know either, which is the accurate position. ### What a comparison should look like - Compare APR, not the headline rate: the fee makes a bigger difference on a small loan than the rate does. - Compare the total cost over the fixed period, including fees, rather than the monthly payment. - Write down the reversion rate and calculate the payment at it. - Calculate the payment at three points above the offered rate, and decide whether it is survivable. - Check the early repayment charge and the annual overpayment allowance. - Only then compare the monthly figures. The order matters. Comparing monthly payments first is how a product with a large fee and an expensive reversion wins a comparison it should lose. Q: Is a fixed or variable mortgage rate better? A: Neither, in the abstract — it depends on your ability to absorb a rise rather than on a forecast. A fixed rate buys a known payment and usually costs slightly more at the outset; a variable rate starts lower and moves with a reference rate. The honest test is arithmetic: calculate the payment at three percentage points above the rate you have been offered, and ask whether it would be uncomfortable or merely annoying. If uncomfortable, buy the certainty. Q: What happens when my fixed rate ends? A: You move to the lender’s reversion rate, which is normally significantly higher, unless you have arranged something else first. This is where a great deal of money is lost quietly. The early repayment charge usually ends at or before the end of the fixed period, so a switch at that point costs nothing, and lenders will offer new products to existing customers. Start looking three to six months before the fix ends rather than in the month it does. Q: Can I switch from variable to fixed? A: Usually yes, though the terms differ. Some variable products carry a contractual right to convert to a fixed rate — sometimes marketed as drop-lock. Otherwise you would remortgage onto a new product, either with your existing lender or a different one. Check for early repayment charges first: pure variable products often have none, which is one of their real advantages, but that is not universal. ## Mortgage Terms Explained: The Words on Every Offer https://mortgagecalculator.siten.co/guides/mortgage-terms-glossary Updated 2026-08-05 · Mortgage basics - The headline rate is the one number people compare and the one least likely to decide what they pay. - APR includes compulsory fees and is the only fair comparison between two offers. - LTV is priced in bands, so a small change in deposit can move the rate for the whole term. - The reversion rate after a short fixed period is the most commonly skipped and most expensive term. - Several terms exist only in one market, which is why translated mortgage advice is so often wrong. Mortgage documents are written in a vocabulary that is precise, unfamiliar and almost never explained at the point of use. That combination is expensive: most people comparing two offers are comparing the only number they recognise, which is the headline rate, and the headline rate is not what they will pay. This is the list of words that change the answer, grouped by where you meet them. ### The rate words | Nominal rate | The interest rate itself, before fees | The number in the advertisement | | APR / APRC | Rate including compulsory fees over the whole term | The only figure that compares two offers fairly | | Fixed period | How long the rate is guaranteed | Often much shorter than the term | | Variable / tracker | Rate that moves with a reference rate | Lower start, unknown middle | | Reversion rate | What you move to when the fixed period ends | Usually much higher — the trap in a cheap two-year fix | | Reference rate | Euribor, base rate, external benchmark | What a variable rate is pinned to | The reversion rate is the term most often skipped and most often expensive. A very cheap short fix followed by an expensive reversion is a marketing structure, not a bargain. ### The amount words | Principal | The amount borrowed, still outstanding | | Deposit | Your own money put into the purchase | | LTV | Loan to value: loan as a percentage of property value | | Equity | The share of the property value that is yours | | Negative equity | When the loan exceeds the property value | | Amortisation | The process of repaying the principal over the term | LTV is the number to optimise. Rates are priced in bands — commonly at 90, 80, 75 and 60 per cent — and moving from just above a band to just below it can save more than any negotiation. ### The affordability words - DTI — debt to income. Total debt payments as a share of gross income. Several markets cap this by regulation. - Income multiple. The loan expressed as a multiple of annual income; a rough cap used alongside DTI. - Stress test. Whether the payments still work at a rate materially above the one offered. - Affordability assessment. The lender’s full view: income, commitments, dependants, essential spending. - Self-certification. Borrowing on stated rather than evidenced income — banned or heavily restricted in most regulated markets since 2008. DTI and the stress test are the two that surprise people. A perfectly affordable payment can be refused because the same payment at a hypothetically higher rate would not be. ### The fee and exit words | Arrangement / product fee | Lender fee for the specific product | A flat sum or a share of the loan | | Valuation fee | Lender’s assessment of the property | Small, sometimes waived | | Early repayment charge | Penalty for repaying or leaving during a fixed period | Often a percentage of the balance, falling each year | | Overpayment allowance | How much you may repay early without penalty | Commonly around a tenth of the balance per year | | Porting | Moving your existing product to a new property | Avoids the exit charge if the lender allows it | | Exit / deeds release fee | Administrative fee at the end | Small but real | The early repayment charge and the overpayment allowance are the pair that decide whether a product suits someone who might move, inherit or receive a bonus. ### The words specific to one market Several terms exist in one country and nowhere else, which is why translated mortgage advice is so often wrong. A few of the common ones, so that you recognise them if you meet them. - Points (United States) — paying a fee up front to buy a lower rate. - Stamp duty (United Kingdom and others) — a purchase tax scaled by price band. - Notaire / Notar fees (France, Germany and others) — statutory transaction costs, not negotiable. - Amortisation requirement (Sweden) — mandatory minimum capital repayment set by LTV. - Mortgage interest relief (Netherlands and others) — tax treatment that lowers the net cost of interest. - Guarantee (France) — a substitute for a registered charge, with its own fee. When comparing across countries, compare the total cost of credit over the same horizon rather than the rate. The rate is the part least likely to mean the same thing on both sides. Q: What is the difference between the interest rate and the APR? A: The nominal interest rate is the cost of borrowing the money alone. The APR — APRC in much of Europe — includes the compulsory fees as well, spread over the term and expressed as an annual percentage. Two offers with the same headline rate can have quite different APRs if one carries a large arrangement fee or compulsory insurance, which is exactly why the figure exists and why it is the only fair way to compare two offers. Q: What does LTV mean and why does it matter? A: Loan to value: the loan expressed as a percentage of the property value. It matters because rates are priced in bands rather than continuously — commonly at 90, 80, 75 and 60 per cent — so a small change in deposit that moves you across a band can lower the rate for the whole term. It also decides whether mortgage insurance is required in markets that use it, and it is the number that determines whether you are in negative equity if prices fall. Q: What is an early repayment charge? A: A penalty for repaying some or all of the loan, or leaving the lender, during a fixed-rate period. It is typically a percentage of the balance repaid, often falling each year of the fix. Most products allow a certain amount of overpayment each year without penalty — commonly around ten per cent of the balance. If there is any chance you will move, sell or receive a lump sum during the fixed period, that allowance and the charge are more important to compare than a small difference in rate. ## How a Mortgage Actually Works, Start to Finish https://mortgagecalculator.siten.co/guides/how-a-mortgage-works Updated 2026-08-04 · Mortgage basics - A mortgage is a loan plus a security interest over the property, and the security is why the rate is low and the process is slow. - Loan to value is the main pricing lever, alongside income stability, existing commitments and credit history. - An affordability figure and an agreement in principle are both indicative; the formal offer is the first binding document. - A down-valuation is the most common late change, because it moves the LTV and therefore the rate band. - If payments become difficult, calling the lender early opens options that disappear once the account is in arrears. A mortgage is two things at once, and confusing them causes most of the misunderstandings. It is a loan, and it is a security interest over the property — the lender’s right to take and sell the house if the loan is not repaid. The second half is why the money is cheap relative to any other borrowing, and why the process is so much slower and more intrusive than any other loan application. ### The security is the point An unsecured loan is priced almost entirely on the chance that you will not repay it. A mortgage is priced on that plus the value of what the lender can recover if you do not. That is why mortgage rates are a fraction of credit card rates, why the lender insists on valuing the property, and why the amount you can borrow is capped by the property value as well as by your income. - The lender registers a charge over the property, which is why the registry fee exists. - Loan to value — the loan as a percentage of the property value — is the main pricing lever. - The valuation protects the lender, not you; a survey is a separate thing you pay for yourself. - You cannot normally sell without repaying the loan, because the charge must be released. This is also why a mortgage takes weeks rather than minutes. Most of the delay is the legal work of establishing what is being secured and against what. ### The stages, and what can still change | Affordability check | Indicative figure based on income and outgoings | Yes — nothing has been verified | | Agreement in principle | Soft assessment, often with a credit check | Yes — it is not an offer | | Full application | Documents submitted and verified | Yes | | Valuation | Lender values the property | Yes — a down-valuation changes the LTV and the rate | | Formal offer | Binding, with a validity period | Rarely, but conditions can be attached | | Completion | Funds released, charge registered | No | The two stages people treat as final are the two that are not: an affordability figure and an agreement in principle are both indicative. The formal offer is the first binding document. ### What the lender is actually assessing - Income — its size, but more importantly its stability and how it is evidenced. - Existing commitments — loans, cards, car finance and dependants, which reduce what is available for a mortgage. - Deposit size — both as a share of the price and as evidence of where it came from. - Credit history — the pattern rather than a single score. - The property — type, construction, condition and whether it is straightforward to sell. - Stress resilience — whether the payments still work at a rate above the one offered. Two applicants with identical incomes routinely get different answers because of items two, four and five. Income is the one everybody focuses on and rarely the one that decides. ### What you owe, and what happens if you cannot pay The obligation is to make the contractual payment on time for the whole term. Missing payments has a defined escalation, and the useful thing to know is that the early steps are cooperative rather than punitive in most regulated markets — lenders would generally rather restructure than repossess, because repossession is slow and expensive for them too. - Contact the lender before missing a payment rather than after; the options are wider while the account is current. - Common arrangements include a temporary payment holiday, a switch to interest-only for a period, or a term extension. - Arrears are reported to credit agencies and affect future borrowing. - Repossession is a last resort and, in most regulated markets, requires a court process. - Independent debt advice is free in most countries and worth using early. This is the section nobody reads before signing and the one that matters most if circumstances change. Knowing that the first call should come from you, early, is the whole of it. ### What ends the mortgage Three routes, and only one of them is the boring one. You repay the loan over the full term and the charge is released. You sell the property, and the loan is repaid out of the proceeds at completion. Or you refinance — a new loan repays the old one, which is why an early repayment charge can apply. Note the middle case: selling does not transfer the mortgage in most markets, it repays it. Some lenders allow porting the product to a new property, which is worth asking about before you fix for a long period. Q: What is the difference between a mortgage and an ordinary loan? A: A mortgage is secured on the property. The lender registers a charge, which gives it the right to take and sell the house if the loan is not repaid, and that security is why the interest rate is a fraction of what unsecured borrowing costs. It is also why the process is slower and more intrusive: much of the delay is legal work establishing exactly what is being secured, and the lender values the property to protect its own position, not yours. Q: Is an agreement in principle the same as a mortgage offer? A: No, and treating it as one causes real problems. An agreement in principle is an indicative assessment, often based on information you supplied and a soft credit check, and it can be withdrawn. The formal mortgage offer comes after the full application, document verification and the valuation, and it is the first binding document in the process. A down-valuation of the property or an inconsistency in the documents can change or end the deal at any point before that offer. Q: What happens if I cannot pay my mortgage? A: Contact the lender before you miss a payment rather than after — the available options are much wider while the account is still current. Common arrangements include a temporary payment holiday, a period of interest-only payments, or extending the term to reduce the monthly figure. Arrears are reported to credit agencies. Repossession is a last resort and in most regulated markets requires a court process; lenders generally prefer to restructure, because repossession is slow and expensive for them as well. ## How a Mortgage Calculator Works: The Formula, Shown https://mortgagecalculator.siten.co/guides/how-a-mortgage-calculator-works Updated 2026-08-04 · Mortgage basics - A mortgage calculator solves one equation — the annuity formula — and then repeats one subtraction per month. - Only four inputs move the answer: amount borrowed, rate, term and (through the amount) deposit. - The payment is constant but its composition is not: interest dominates early, which is why early overpayments are worth most. - Total interest over a long term is the figure no advertisement shows and the one that makes the term decision real. - Purchase taxes and fees are often larger than any rate difference and usually cannot be borrowed. A mortgage calculator is not doing anything mysterious. It is solving a single equation — the annuity formula — and then repeating one subtraction for every month of the term. Knowing the formula matters for a practical reason: it tells you exactly which four inputs move the answer, and it makes obvious why a bank’s figure will not match yours. ### The formula For a standard repayment loan, the monthly payment is fixed for the whole term and is calculated so that the final payment clears the debt exactly. Written out: payment equals P times i, divided by one minus (one plus i) to the power of minus n. P is the amount borrowed, i is the monthly interest rate — the annual nominal rate divided by twelve — and n is the number of months. - P — the amount borrowed, which is the price minus your deposit, not the price. - i — the monthly rate. A 4.8% annual nominal rate is 0.004 per month. - n — months, not years. A 25-year term is 300. - If the rate is zero the formula divides by zero; the payment is simply P divided by n. Note what is missing from that list. Your income does not appear, and neither does the property value except through the deposit. Those affect which rate you are offered, not the arithmetic once you have one. ### A worked example Borrow 200,000 at 4.8% nominal over 25 years. The monthly rate is 0.004 and the term is 300 months. The formula returns a payment of about 1,146. Multiply by 300 and you have repaid roughly 343,800 — about 143,800 of it interest, which is more than seventy per cent of the amount borrowed added on top. | Amount borrowed | 200,000 | Payment moves in exact proportion | | Rate | 4.8% | Strongly non-linear — the effect grows with the term | | Term | 25 years | Longer term, lower payment, much more total interest | | Deposit | Reduces P | Also usually buys a lower rate band | The single most surprising figure for most first-time borrowers is the total interest. It is not printed on any advertisement, and it is the number that makes the term decision real. ### What happens month by month The payment is constant, but its composition is not. Each month the interest is charged on the balance outstanding at that moment; whatever is left of the payment reduces the balance. Early on the balance is large so the interest share is large, and progress feels slow. Late on it reverses. | Month 1 | About 70% | Almost none | | Year 5 | About 60% | Roughly 12% | | Year 12 | About 45% | Roughly 35% | | Year 20 | About 20% | Roughly 75% | | Final year | Under 5% | The rest | This is why overpaying early is worth so much more than overpaying late: an early overpayment removes interest from every remaining month. ### What most calculators leave out The formula gives you the loan repayment. It does not give you the cost of buying a house, and in several markets the gap is enormous — purchase taxes and fees can add a tenth of the price, and they are almost never lendable, which means they must be found in cash on top of the deposit. - Purchase taxes — transfer tax, stamp duty, registration tax. The largest single line in most European markets. - Notary and registry fees, which are fixed by law in several countries rather than negotiable. - Arrangement or product fees charged by the lender, sometimes addable to the loan and sometimes not. - Compulsory insurance — mortgage insurance below a deposit threshold, or borrower insurance priced into the offer. - Mandatory amortisation rules, which raise the monthly payment above the pure annuity figure in some markets. Our calculator adds these per market, because a payment you can afford on a house you cannot complete on is not a useful answer. ### Why the bank’s number will differ - The bank quotes APR, which includes fees; the formula uses the nominal rate. - Compulsory insurance is added to the payment in several markets. - Day-count and rounding conventions differ slightly between lenders. - The rate you were quoted online is the best band; the rate you are offered depends on your deposit, income and credit history. - Some products are not pure annuities — interest-only periods, stepped payments, or mandatory amortisation schedules. A calculator gives you the shape of the deal and the questions to ask. Only a lender’s binding illustration gives you the deal. Q: What formula does a mortgage calculator use? A: The standard annuity formula: monthly payment equals the amount borrowed multiplied by the monthly interest rate, divided by one minus (one plus the monthly rate) raised to the power of minus the number of months. The monthly rate is the annual nominal rate divided by twelve, and the number of months is the term in years multiplied by twelve. If the rate is zero the formula breaks down and the payment is simply the amount borrowed divided by the number of months. Q: Why does more of my early payment go to interest? A: Because interest is charged on the balance outstanding, and at the start the balance is at its largest. The payment itself is constant, so if the interest portion is large the portion left to reduce the debt is small. As the balance falls the interest charge falls with it and more of the same payment goes to capital. On a typical 25-year loan the first payment can be around seventy per cent interest, and the last is almost entirely capital. It is also why an overpayment early in the term saves far more than the same overpayment late. Q: Does a mortgage calculator include fees and taxes? A: Most do not, and in many markets that omission is larger than any difference in the rate. Purchase taxes, notary and registry fees, agent commission and lender fees can add anywhere from two to ten per cent of the price depending on the country, and they usually cannot be borrowed, so they have to be found in cash alongside the deposit. Our calculator itemises them per market for exactly this reason.