Glossary · UK
What is Mortgage Repayment?
The fixed monthly payment that clears a repayment mortgage over its term, covering capital and interest.
Full Definition
On a repayment (capital-and-interest) mortgage you pay a fixed monthly amount that gradually clears the loan over the term. Early payments are mostly interest; as the balance falls, more of each payment goes to capital. The monthly figure is set by the standard amortising formula from the loan amount, the monthly interest rate and the number of payments. Interest-only mortgages instead pay just the interest each month, leaving the capital to be repaid at the end. A higher rate or a longer term raises the total interest paid over the life of the loan.
How Mortgage Repayment is calculated
M = P x r x (1 + r) ^ n / ((1 + r) ^ n - 1)- M
- Monthly payment.
- P
- Loan amount (principal).
- r
- Monthly interest rate = annual rate / 12.
- n
- Total number of monthly payments = years x 12.
Worked example: A GBP 200,000 loan at 5% over 25 years: r = 0.05 / 12, n = 300, giving M = about GBP 1,169 a month and roughly GBP 150,800 of interest over the term.