In the United Kingdom, the average home now costs over £200,000. Whether you're a first-time buyer hoping to get on the property ladder or a current homeowner looking to move home, you may require at least a £200,000 mortgage for the right property. This is also true if you’re remortgaging and have at least £200,000 left on your existing mortgage or want to release some equity.
If you're considering applying for a £200,000 mortgage, it's a good idea to learn more about lender criteria, what you expect the overall cost of your mortgage to be, the monthly repayments you'll be bound to and the factors that can influence these.
In this Guide, We Cover the Following Topics:
- What Is a £200,000 Mortgage?
- What Is the Total Cost of a £200,000 Mortgage?
- What Are the House Repayments on £200,000 Mortgage?
- Calculating the Monthly Cost of £200,000 Mortgage
- How Can I Reduce House Repayments on 200,000 Mortgage?
- How to Work Out if You Can Afford a £200,000 Mortgage
- How We Help You Get a £200,000 Mortgage
What Is a £200,000 Mortgage?
A £200,000 mortgage is a secured loan taken out by a borrower to purchase or refinance a property. The loan amount is £200,000 and is secured against your new or existing home. The borrower agrees to meet the monthly payment, typically comprising a capital payment and interest payment, in order to repay the loan plus interest over a specified mortgage term such as 25 years. You will likely remortgage onto a new deal before the end of the mortgage term as your introductory rate ends, to avoid going onto your lender’s more expensive SVR (standard variable rate).
What Is the Total Cost of a £200,000 Mortgage?
The total cost of a £200,000 mortgage refers to the overall amount you'll pay if you take out a mortgage for this amount with a lender. Though it's common to assume that the total cost of a £200,000 mortgage is simply that - £200,000 - there are multiple charges and factors to consider, including the following:
Loan amount – as on a £200,000 mortgage you’re borrowing £200,000, you’ll need to repay this by the end of the mortgage term (or when you remortgage). You typically repay the capital loan amount via either monthly capital repayments or in one bulk payment as the end of the mortgage term (or upon remortgaging)
Interest - another main cost to consider is interest. When you take out a mortgage you’re charged an interest rate. This interest rate is charged on the outstanding loan amount. With a typical repayment mortgage, you make monthly payments that include both a capital repayment and an interest payment. With an interest-only mortgage, you only pay the interest each month and repay the outstanding loan amount at the end of the mortgage term. The kind of interest rate you secure will depend on a few different factors, such as your credit history and your LTV (loan-to-value)
Deposit – it’s very well known that you’ll likely need a deposit to secure a mortgage. The minimum deposit you need to provide is at least 5% of the property’s purchase price. This means that if you wanted a mortgage on a £200,000 house, you would need at least £10,000 in deposit and the loan would make up the remaining £190,000. If you wanted to secure a mortgage of around £200,000 for a house worth £210,000, you’d need about £10,500 in deposit. You don’t pay your house mortgage deposit until exchange of contracts
Stamp Duty – you have to pay Stamp Duty Tax when you purchase a property in the UK worth over a certain amount. Work out how much Stamp Duty you’ll pay with our Stamp Duty Tax Calculator.
Fees – you’ll have a few fees to pay when you take out a mortgage. This can include solicitors’ fees, lenders’ fees, broker fees, survey fees, moving costs, etc.
What Are the House Repayments on £200,000 Mortgage?
The house repayments on £200,000 mortgage will vary depending on your deal. Here are some general factors that will impact your monthly payments:
- Type of mortgage - with a typical repayment mortgage, you make monthly payments that include both a capital repayment and an interest payment. With an interest-only mortgage, you only make interest payments each month as you pay off the outstanding loan amount at the end of the mortgage term. This means that interest-only mortgages typically have lower monthly costs. However, as the interest rate is charged on the total outstanding mortgage amount at that time – and the outstanding loan balance doesn’t reduce each month on an interest-only mortgage like it does with a repayment mortgage - you usually pay more interest overall with an interest-only mortgage than a repayment mortgage. The kind of interest rate you secure will depend on a few different factors, such as your credit history and your LTV (loan-to-value)
- Interest rate – whether you opt for a fixed rate or a variable rate (like a tracker) will impact your monthly payments. A fixed rate stays the same for the rate period while a tracker moves in line with the Bank of England Base Rate. This means that with a fixed rate your monthly payments will be the same each month, but with a tracker your payments can fluctuate slightly. Whether you secure a cheaper or more expensive interest rate will depend on a few different factors, such as the market, your credit history and your LTV (loan-to-value). Fixed or tracker rates are normally set for a number of years – e.g. 5. After this, you’ll be transferred onto your lender’s SVR (standard variable rate) for the remainder of the mortgage term unless you remortgage onto a new, likely cheaper, deal
- Length of mortgage plan - most mortgage plans typically span around 25 years, but it's possible to secure a loan for a shorter or longer period. The length of your mortgage plan will affect the total and monthly cost of your £200,000 mortgage. The longer it takes to repay your mortgage, the lower your monthly payments will be but the longer you'll be paying interest and therefore the more interest you’ll pay overall. The length of mortgage term that’s best for you will depend on your mortgage affordability
- Your deposit - if you can put forward a 20% deposit, the amount you'll need to borrow from a mortgage lender will reduce, lowering the LTV and giving you access to lower rates. If you can only pay a small deposit, such as 5%, you'll need to borrow more from your lender, which will means the interest will be charged on a larger amount and the rate itself will likely be higher
- Your credit history - when you apply for a mortgage, your chosen lender will review your credit history before making you an offer. If your credit history is "good" or "excellent", your lender will feel more confident that you can keep up with house repayments. This means you could be eligible for lower interest rates on your mortgage and reduced total house payments. If your credit history is "very poor" or "poor", you may find that interest rates are higher, meaning your monthly payments will be too
Calculating the Monthly Cost of £200,000 Mortgage
To calculate the monthly cost of a £200,000 mortgage it’s best to look at the kind of interest rates that are available to you. You can do this by looking at moving home mortgage deals or remortgage rates with our best buy tools.
Once you have a better idea of the rates out there, try out mortgage repayment calculator to get an estimate of your potential monthly payments.
For a more accurate picture of what your £200,000 mortgage payment will look like each month, talk to one of our mortgage advisers on 0330 433 2927.
How Can I Reduce House Repayments on 200,000 Mortgage?
If you’d like to take steps to reduce the interest and capital repayments on a £200,000 mortgage as much as possible, then you pay want to consider the following:
Use an independent mortgage broker like John Charcol - this is the easiest way to make sure you secure the cheapest rate for your circumstances
- Improve your credit rating - a better credit profile will give you access to more deals and better rates
- Opt for interest-only – you don’t make regular capital repayments with an interest-only mortgage, which will reduce what you pay towards your mortgage each month. Bear in mind that with interest-only, although the monthly payments are lower you’ll end up paying more interest overall
- Make overpayments – this may seem confusing at first but by making overpayments when you can, you’re able to reduce the outstanding loan balance and reduce future monthly mortgage payments
- Consider an offset mortgage – with an offset mortgage deal you can use offset your savings against the mortgage to reduce the amount of interest you’re charged each month
How to Work Out if You Can Afford a £200,000 Mortgage
Typically, to afford a £200,000 mortgage you need to earn around at least £45,000 per year (based on a typical mortgage income multiplier of 4.5) If you’re applying with another applicant then your joint income needs to total at least £45,000 per year.
£200,000 Mortgage Calculator
Our How Much Can I Borrow? Calculator will give you an idea of your potential maximum borrowing based on your income. Bear in mind that you won’t definitely be able to borrow this much as other factors such as your monthly outgoings and credit history will impact what the lender can actually offer you. Find out more by speaking to a mortgage adviser on 0330 433 2927.
How We Help You Get a £200,000 Mortgage
As an independent mortgage broker, we can offer you any advice and guidance that you may require. Our experienced mortgage advisers are knowledgeable on the market as well as different lenders and their criteria. This means we can assess your situation and match you with the right lender with the best deal for you.
Ready to discuss your needs with us? Contact us today by calling 0330 433 2927.
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