Repayments on a £150,000 Mortgage

To afford a £150,000 mortgage you need to meet the lender’s criteria, including their income requirements. Most lenders will work the maximum amount you can potentially borrow by using a mortgage income multiple such as 4.5. So, in order to be eligible to borrow a £150,000 mortgage, you would likely need to earn at least £35,000 per year (£35,000 x 4.5 = £157,500).

When you take out a mortgage you typically secure it on a repayment or interest-only basis.

With a repayment mortgage, your monthly payments are made up of a capital repayment and an interest payment, which means you pay back the amount you borrowed plus interest over the mortgage term.

With an interest-only mortgage deal, your monthly payments are made up of just interest payments. This means you don’t make any capital repayments until the end of the mortgage term when you pay back the loan via a suitable repayment vehicle such as money from investments or selling the property. Because with an interest-only mortgage the outstanding loan balance isn’t reducing every month – and the interest is charged on the outstanding loan balance – you end up paying more interest overall on an interest-only mortgage despite the lower monthly payments.

The mortgage term is the amount of time over which you pay off your loan (or have to repay it by). This usually happens in intervals of 5 years, up to 40 years, though some lenders will offer loans shorter than 5 years.

On a repayment mortgage, your mortgage affordability and term length go hand in hand: the term length will be impacted by what you can afford to pay each month (based on your income and monthly outgoings), and what you pay each month will be impacted by the term length.

Essentially, the longer you have to repay your mortgage the lower your monthly payments will be, and the shorter the period you have to repay your mortgage the higher your monthly payments will be.

This means that you may have to opt for a different mortgage term than you first wanted in order to comfortably afford the monthly capital repayments and interest payments.

Bear in mind that a longer term length will also increase the amount of interest that you pay over the course of your mortgage. This is true for repayment and interest-only mortgages, however the mortgage term won’t impact your monthly payments on an interest-only mortgage as the outstanding loan amount stays the same until the end of the term.

One of the big factors that can affect your monthly payments is the interest rate. Now, the interest rate won’t necessarily impact the part of your monthly payment that goes towards repaying the mortgage (capital repayment) but it will affect the part that makes up the interest payment. A higher interest rate essentially means potentially higher overall monthly payments which is why you’ll usually want to try and secure a lower interest rate.

You’ll also have the option of a fixed rate or a variable (typically tracker) rate. A fixed rate essentially means you’re charged a fixed rate of interest during the deal period while a tracker fluctuates in line with the Base Rate. Fixed rates offer more stability and make it easier to budget as your monthly payments don’t fluctuate, but tracker rates can sometimes be more cost-effective. The best rate for you will depend on your situation and market conditions. Discuss this with your mortgage adviser to find out more.

Improving your credit score and providing a larger deposit can both give you access to more lenders and cheaper mortgage rates, as well as using an independent mortgage broker like John Charcol.

Some examples of monthly payments on a £150,000 fixed interest rate repayment mortgage.

If you have an interest-only mortgage, your monthly payments will be much lower than a repayment mortgage. As an example, the interest-only payments on a £150,000 mortgage would be as follows:

Again, on a flexible interest rate, this would change during the course of your mortgage. You might also be offered a very different interest rate than those listed above.

You would also pay more in interest overall than on a repayment mortgage.

If you're looking at getting a £150,000 mortgage, you might want to estimate how much your monthly payments will be before you make any firm decisions. Of course, until you get a mortgage offer you can only estimate the specifics of your deal, but it can still be very useful to get a rough idea of how much you’ll have to pay each month.

First, work out how much you can borrow based on your income with our calculator. Second compare mortgage deals to see what kind of interest rates could be available to you. Third, use our mortgage repayment calculator to work out your potential monthly payments.

Getting the help of an independent mortgage broker like John Charcol is the simplest way to ensure you get the best mortgage deal.

Whether the best deal for you means lower monthly payments, a shorter mortgage term, a low deposit mortgage, the cheapest rate, overpayment facilities or something else, we’ll be able to help.

Our experts will listen to your requirements and needs and give you advice on the different things to consider, so you know you’re going in the right direction.

Finally, we can also help you secure a competitive deal even in complex situations, such as if you have bad credit or require lending on a specialist property.

Here at John Charcol, we have years of experience in helping people find great deals on their mortgages. Get in touch today to see how we can help you minimise your monthly repayments.