£500,000 Mortgage: Monthly Cost Worked Example 2026/27
A worked case study of what a £500,000 mortgage actually costs each month at 4.5%, 5% and 5.5%, over 25 and 30 years, repayment vs interest-only, plus the income and SDLT involved.
Monthly Cost at Different Rates and Terms
The monthly cost of a £500,000 mortgage depends heavily on the interest rate secured and the term chosen. The table below shows illustrative repayment figures using standard amortisation, assuming the full £500,000 is borrowed on a capital repayment basis.
| Rate | 25-year term | 30-year term |
|---|---|---|
| 4.5% | £2,779 | £2,534 |
| 5.0% | £2,923 | £2,685 |
| 5.5% | £3,071 | £2,839 |
Even a 0.5 percentage point difference in rate moves the monthly payment by well over £100 at this loan size, which is why comparing rates carefully — and understanding where your rate sits relative to base rate expectations — matters more as the loan amount rises. You can model your own scenario using the Mortgage Calculator, adjusting rate and term to see the effect on your specific numbers.
Repayment vs Interest-Only
Choosing interest-only rather than capital repayment substantially reduces the monthly outgoing, because you're only servicing the interest on the £500,000 balance rather than also paying down the capital.
| Basis | Monthly cost at 5% (25-year term) |
|---|---|
| Capital repayment | £2,923 |
| Interest-only | £2,083 |
The £840 monthly saving on interest-only is attractive on cash flow, but it comes with an important catch: the £500,000 owed does not reduce at all during the term. Borrowers choosing interest-only need a credible, lender-approved repayment strategy — such as an ISA, pension lump sum, downsizing, or investment portfolio — to clear the balance when the term ends, and most residential lenders will only offer interest-only where that strategy is clearly evidenced.
Income Needed Under a 4.5x Multiple
Many lenders use an income multiple as a starting point for how much they'll lend, though the exact multiple offered depends on affordability, outgoings, credit history and the specific lender's policy. Using an illustrative 4.5x multiple as a benchmark:
- £500,000 ÷ 4.5 = approximately £111,100 required income
Some lenders extend to 5x or higher for certain borrower profiles (for example, professionals in specific occupations, or high-LTV first-time buyer schemes), which would reduce the income requirement to around £100,000. But the income multiple is only a starting filter — actual affordability is also stress-tested against a higher notional interest rate to check the mortgage would remain serviceable if rates rose after completion. The Mortgage Affordability Calculator factors in both the income multiple and a stress-tested rate together.
Stamp Duty on a £500,000 Purchase
SDLT treatment differs significantly depending on whether the £500,000 property is your main residence or a second home / investment purchase.
As a standard main-residence purchase:
| Band | Rate | Tax due |
|---|---|---|
| £0 – £250,000 | 0% | £0 |
| £250,000 – £500,000 | 5% | £12,500 |
| Total | £12,500 |
As a second home or investment property (with the 5-percentage-point surcharge applied from the first pound):
| Band | Rate | Tax due |
|---|---|---|
| £0 – £250,000 | 5% | £12,500 |
| £250,000 – £500,000 | 10% | £25,000 |
| Total | £37,500 |
That's an extra £25,000 in upfront tax purely from the property being classed as an additional home, on top of the standard £12,500. Use the Stamp Duty Calculator to check the exact SDLT for your own purchase price and buyer status, including whether first-time buyer relief might apply if the price is below £625,000.
Putting the Numbers Together
A realistic budget for a £500,000 mortgage on a main residence, at 5% over 25 years, needs to account for roughly £2,923 a month in mortgage payments, an upfront SDLT bill of £12,500, plus legal fees, survey costs and moving costs typically running to a few thousand pounds more. For a second property at the same price and rate, the monthly mortgage cost is similar (buy-to-let mortgages often carry a rate premium and are frequently taken on an interest-only basis), but the SDLT bill is £25,000 higher at £37,500, which materially changes the total cash needed to complete.
Frequently asked questions
What is the monthly repayment on a £500,000 mortgage at 5%?
Over a 25-year repayment term at 5%, a £500,000 mortgage costs approximately £2,923 a month. Over 30 years the same rate brings the payment down to roughly £2,685 a month, because the loan is spread over more payments, though total interest paid rises considerably over the longer term.
How much income do I need for a £500,000 mortgage?
Using an illustrative 4.5x income multiple, a £500,000 mortgage would typically require an income of around £111,100, either as a sole applicant or combined across joint applicants. Some lenders offer higher multiples of 5x or more to certain borrowers, which would lower the income requirement to roughly £100,000, but affordability stress testing still applies on top of the income multiple.
Is interest-only cheaper than repayment on a £500,000 mortgage?
Yes, considerably in monthly cash-flow terms — at 5%, interest-only costs about £2,083 a month compared with £2,923 on a 25-year repayment basis, a difference of roughly £840 a month. However, interest-only never reduces the £500,000 balance itself, so a separate repayment vehicle or planned sale is essential to clear the capital at the end of the term.
How much stamp duty is due on a £500,000 house purchase?
As a standard main-residence purchase in England, SDLT on £500,000 is £12,500, calculated as 0% on the first £250,000 and 5% on the remaining £250,000. As a second home or investment property, the 5-percentage-point surcharge applies from the first pound, bringing the total to £37,500.
How much does a 0.5% rate rise add to a £500,000 mortgage?
Moving from 4.5% to 5% on a £500,000 25-year repayment mortgage increases the monthly payment from roughly £2,779 to £2,923, an increase of about £144 a month, or over £1,700 a year. The impact compounds over the mortgage term, so even a small rate change is worth stress-testing before committing to a rate.
Does a 30-year term make a £500,000 mortgage more affordable?
It reduces the monthly payment noticeably — at 5%, a 30-year term brings the payment down to about £2,685 versus £2,923 over 25 years, a saving of roughly £238 a month. The trade-off is a meaningfully higher total interest bill over the life of the loan, and the mortgage is likely to run further into retirement age, which some lenders factor into affordability checks.
What's the difference between borrowing £500,000 as a first-time buyer versus a home mover?
If the £500,000 purchase price qualifies for first-time buyer relief (available up to £625,000), SDLT would be reduced to £3,750 rather than the £12,500 a home mover would pay, because the first £425,000 is tax-free for first-time buyers. The mortgage itself is priced the same way regardless of first-time buyer status; only the SDLT liability differs.
How much deposit is typically needed to get a £500,000 mortgage?
At 90% loan-to-value, a £500,000 mortgage implies a purchase price of roughly £555,600 and a deposit of about £55,600. At 75% LTV, the same £500,000 loan implies a purchase price of about £666,700 and a deposit of roughly £166,700 — the required deposit rises sharply as the target LTV falls.
Can I get a £500,000 mortgage on a single income?
It's possible but requires a high single income relative to most UK earners — at a 4.5x multiple, you would typically need an income of around £111,100, and most single applicants at that income level would also need to pass an affordability stress test at a higher notional rate. Joint applications spread the required income across two people, which is why most £500,000-plus mortgages are taken out jointly.
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