How Mortgage Interest Works

Mortgage interest is the cost of borrowing money to buy your home. Understanding how it works can help you save thousands of pounds.

How Mortgage Interest is Calculated

Most UK mortgages charge interest monthly based on your outstanding balance. The interest is added to your payment each month.

Fixed vs Variable Rates

• Fixed rate: Interest rate stays the same for a set period (e.g., 2, 5, or 10 years)
• Variable rate: Interest rate can change, often linked to the Bank of England base rate

How to Save on Mortgage Interest

• Make overpayments when possible to reduce the principal faster
• Remortgage to a lower rate when your deal ends
• Increase your deposit to get a better rate
• Choose a shorter mortgage term if you can afford higher payments