Monthly Mortgage Costs
Just as crucial as working out whether you can afford the one-off costs of buying (and selling, if you have to do that too) is making sure that you will be able to meet the ongoing monthly cost of home ownership.
The four major factors that will affect what your monthly mortgage repayment will be the amount you borrow, the length of time you borrow it for, the type of mortgage you have (e.g. repayment or interest-only) and the interest-rate option you choose.
How Much Can You Afford?
To give you an idea of what your mortgage repayments will be, the table below gives the monthly cost, for different sizes of loan, of a repayment mortgage paid back over 25 years at interest rates varying from 3% to 8%.
| Loan Size | 3% | 4% | 5% | 6% | 7% | 8% |
|---|---|---|---|---|---|---|
| £50,000 | £240 | £267 | £296 | £326 | £358 | £391 |
| £60,000 | £287 | £320 | £355 | £391 | £429 | £469 |
| £70,000 | £335 | £373 | £414 | £456 | £501 | £547 |
| £80,000 | £383 | £426 | £473 | £522 | £572 | £625 |
| £90,000 | £431 | £480 | £532 | £587 | £644 | £703 |
| £100,000 | £479 | £533 | £591 | £652 | £715 | £781 |
| £125,000 | £599 | £666 | £739 | £815 | £894 | £976 |
| £150,000 | £719 | £800 | £887 | £978 | £1,073 | £1,172 |
| £200,000 | £958 | £1,066 | £1,182 | £1,304 | £1,430 | £1,562 |
| £250,000 | £1,198 | £1,333 | £1,478 | £1,630 | £1,788 | £1,953 |
| £300,000 | £1,435 | £1,600 | £1,770 | £1,960 | £2,150 | £2,340 |
| £400,000 | £1,915 | £2,135 | £2,360 | £2,610 | £2,860 | £3,120 |
| £500,000 | £2,400 | £2,670 | £2,960 | £3,260 | £3,580 | £3,910 |
| £600,000 | £2,870 | £3,200 | £3,550 | £3,910 | £4,290 | £4,690 |
| £700,000 | £3,350 | £3,735 | £4,140 | £4,560 | £5,010 | £5,470 |
Above: Monthly mortgage costs for loans payable over a 25 year period at varying rates of interest.
Forward Planning
If you have chosen a discounted rate mortgage, you will need to allow for the increased cost when the deal comes to an end. Likewise, if you choose a variable rate mortgage, you will need to be prepared for your monthly payments to increase when interest rates rise.
It's important not to overstretch yourself financially and take on a larger mortgage than you can afford to pay, as you run the risk of losing your home. Although you may be able to afford the repayments now, you need to consider what would happen if interest rates rise and your monthly repayments go up? It's a good idea to look at the payments that you would have to make if the interest rates were 1% or 2% higher than they are now. Would you still be able to afford your mortgage?