Repayments on a £100,000 Mortgage

The main cost of a £100,000 mortgage will ultimately be £100,000 plus interest, but the amount you pay in interest will depend on the depend on the specific terms of your deal, such as the interest rate, mortgage term and repayment method.

On average, a £100,000 mortgage at a 3% interest rate over 25 years could cost around £400 - £450 per month. However, this is an estimate, and the actual costs will vary. Using a mortgage repayment calculator to work out the repayments on a £100,000 mortgage or consulting with an independent mortgage broker will give a more accurate estimate.

Several factors can affect the repayments on a £100,000 mortgage in the UK:

• Your monthly outgoings and overall mortgage affordability - before offering you a deal, a lender will look at you what you can afford to spend on a mortgage each month. Once they have a clearer idea of your affordability, they’ll be able to determine things like how much they can lend to you (in this case, whether they can actually lend you £100,000) and your mortgage term, which in turn will impact your mortgage payments
• The loan amount - obviously, how much you borrow will impact how much you have to pay back every month and how much interest is charged. Now a £100,000 mortgage isn’t huge in the realm of mortgages, so the capital repayments and interest payments on a mortgage of this size will be noticeably smaller than those on other, more commonly borrowed amounts
• Interest rate - essentially, a higher interest rate means higher monthly payments, while a lower interest rate means lower monthly payments. A variable interest rate can also cause your monthly payments to vary slightly each month
• Loan term - the loan term, or the length of the mortgage, can also impact the monthly payments. A shorter loan term means higher monthly payments, while a longer loan term means lower monthly payments. On the other hand a shorter loan term means less interest paid overall, while a longer loan term means more interest paid overall
• Repayment method - a £100,000 interest-only mortgage will have lower monthly payments than a repayment mortgage but you’ll have to pay off the outstanding loan amount at the end of the mortgage term via a suitable repayment vehicle. You also pay less interest overall with a repayment mortgage as the interest is charged on the outstanding loan amount and this decreases every month on a repayment plan
• Fees - there are several fees associated with taking out a mortgage, such as arrangement fees, valuation fees and legal fees. These fees can increase the overall cost of the mortgage and affect the monthly payments
• Deposit - providing a bigger deposit can lower your monthly payments. Find out more in the section below

The interest rate on a £100,000 mortgage in the UK can significantly affect the monthly payments on both an interest-only and repayment mortgage as it will affect the amount of interest paid each month.

The interest rate is the rate at which the lender charges the borrower. It is calculated as a percentage of the total outstanding loan amount.

• Higher interest rates - if the interest rate is high, the monthly payments will be higher, as the borrower will pay more interest over the loan term
• Lower interest rates - if the interest rate is low, the monthly payments will be lower, as the borrower will pay less interest over the loan term
• Fixed versus variable interest rates - a fixed interest rate means that the interest rate is set for a specified period, such as 2 years, and the monthly payments will not change during that time. A variable interest rate means that the interest rate can change over time, and the total monthly payments will change accordingly

To calculate the mortgage repayments on a £100,000 mortgage in the UK, you'll need to know the interest rate, loan term and type of loan.

Here's a step-by-step guide:

You can use a mortgage repayment calculator to help you calculate the monthly repayments on a £100,000 mortgage. Here is an estimate of the monthly payments on a £100,000 repayment mortgage for a few different mortgage terms and interest rates.

An interest-only mortgage is a mortgage where the borrower only pays the interest over the mortgage term. They don’t make any capital repayments that go towards paying off the outstanding loan amount. It’s only at the end of the mortgage term that borrower must repay the loan in full, often by selling the property or using income from other investments.

Interest-only mortgages don’t affect capital mortgage repayments as there are none; your monthly payments comprise interest payments only. They do however impact what your monthly payments will be and how your overall mortgage cost.

Here’s how:

• Lower monthly payments – without a capital mortgage repayment to make each month, your monthly payments will be smaller. This can make the loan more affordable in the short term
• Higher overall cost - as you're not paying off the principal loan via regular repayments, the total amount owed remains the same. And, as interest is applied on the outstanding loan amount, this means that more interest is charged overall which can make the total cost of the mortgage more expensive in the long term
• Lack of equity - because you're not paying back the mortgage each month, you don’t build up any equity in the property that you can use for future purchases

It's important to carefully consider the terms of an interest-only mortgage and the reliability of your repayment vehicle before deciding this is the right option for you.

Interest-Only Payments on a £100,000 Mortgage

If you have an interest-only mortgage, you can expect your monthly payments to be lower. Here are examples of potential £100,000 interest-only monthly payments for you to compare with the table above.

The income or salary needed to be eligible for a £100,000 mortgage is around at least £23,000 per year – but whether a lender will grant you a mortgage for this amount will depend on other factors such as your credit history, deposit, monthly outgoings, etc.

To work out how much you could borrow up to based on your income, use our calculator: How Much Can I Borrow?

The eligibility criteria for a £100,000 mortgage can vary between lenders, but here are some common factors lenders will consider:

• Income - lenders typically require proof of regular income from employment or self-employment, to ensure that you can repay the mortgage
• Credit history - lenders will check your credit history to assess your creditworthiness and ability to repay the loan. A good credit score and history can help you secure better rates and terms
• Affordability - lenders will consider your monthly income, expenses, and other debts when determining how much you can afford to repay each month
• LTV - lenders may have different LTV criteria, and a higher minimum LTV will require that you provide a larger deposit
• Age - some lenders have age restrictions, meaning you need to be a certain age to qualify for a mortgage
• Property type - some lenders may restrict the type of property you can purchase with a mortgage. Properties classified as non-standard construction, such as thatched roofs or listed buildings, may not be eligible

Your mortgage broker will talk you through lender eligibility criteria and find you the right match based on your situation when you help you apply for a mortgage.

There are several ways to reduce the monthly payments on a £100,000 mortgage:

• Use a mortgage broker like John Charcol - this is the simplest way to ensure you secure a mortgage with the cheapest rate available for your circumstances
• Choose a longer mortgage term - by spreading your capital repayments over a longer period, you can reduce your monthly payments. However, this will increase the amount of interest you pay over the life of the mortgage
• Opt for interest-only - if keeping your monthly payments low is critical for you and you have a suitable repayment vehicle in mind, then consider an interest-only mortgage instead of repayment. It’s a good idea to consult a broker if this is an option you’d like to pursue
• Make overpayments - this may seem counterintuitive but by making overpayments, you can reduce the outstanding loan amount which will result in lower future monthly payments. Before taking out a mortgage, see if the lender offers overpayment facilities or simply ask your mortgage adviser to bear this in mind when finding you a mortgage deal
• Consider an offset mortgage - an offset mortgage allows you to reduce the interest you pay by using the funds in a savings account to offset the amount you owe on your mortgage. This can result in lower monthly payments. Ask your mortgage adviser if you’d like to learn more about offset products

Ready to get started on your mortgage journey? Or simply want to chat to an expert about your options? Contact us on 0330 433 2927. One of our expert advisers will answer all your questions about what repayments on a £100,000 mortgage will look like for you and what deals are available now.