Calculating The Cost Of A Mortgage
Before taking on any debt, especially something as large as a mortgage is likely to be you should ensure you understand what the debt will cost you. This article explains how to calculate the interest charged on a mortgage.
To calculate the monthly interest we need to know the yearly interest rate (APR) and the size of the debt. The monthly interest is then determined by the formula:
interest = (debt x (interest rate / 100)) / 12
So for a concrete example if the mortgage is £120,000 and the interest rate is 5% then the monthly interest will be:
interest = (120,000 x (5 / 100)) / 12
interest = 500
If you choose to take out a repayment mortgage the calculation will be different. As most property investment is done using interest only mortgages we've decided not to cover that calculation.
If you don't fancy finding your calculator visit our Mortgage Calculator page and we'll do the maths for you.
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