Repayment vs interest-only
With a repayment mortgage, each payment covers interest and part of the loan, so the balance reaches zero at the end of the term. With interest-only, you pay just the interest and must repay the full loan at the end from a credible repayment plan.
Why test a rate rise?
When your fixed rate ends, your payment may change. The +1% figure helps you check the payment would still be comfortable.
Frequently asked questions
How is a monthly mortgage payment calculated?
It uses the loan amount, the interest rate and the term to work out a level monthly payment that clears the loan by the end of the term (for repayment mortgages).
Is a longer term cheaper?
A longer term lowers the monthly payment but usually increases the total interest you pay.
Can I overpay my mortgage?
Most lenders allow overpayments of up to 10% a year during a fixed or discounted period without charges. Check your lender's terms.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice: up to 1% of the loan, typically £500.