Interest only, part repayment or full repayment
Every loan sits somewhere between paying none of it back and paying all of it back over the term. The only thing that changes is how much of the balance is repaid by the end. This calculator covers the whole range with one setting: the repayment type, and for part repayment, how much is repaid by the end of the fix.
| Type | Repaid by the end of the fix | Owed at the end |
|---|---|---|
| Interest only | Nothing | The whole loan |
| Part repayment (partial amortisation) | A set slice, e.g. 75% LTV down to 70% | The rest, repaid or refinanced |
| Full repayment (capital and interest) | All of it | Nothing |
Part repayment is common on commercial and larger buy-to-let loans, where a lender wants the LTV to come down over a five-year term without the payment of a full 25-year repayment mortgage. You may also see it called part and part, or partial amortisation.
Mortgage term and fixed period
The mortgage term is how long the loan runs, often 25 years. The fixed period is how long the rate is fixed, often five years. After the fix the loan moves to the reversion rate (leave it blank to assume the same rate). The schedule runs the full term and marks where the fix ends. The true rate, interest, fees and cost are measured over the fix, because that is usually when the loan is refinanced.
Level payment or straight-line
With a level payment you pay the same amount every month of the fix, sized so the balance reaches the target at the end of the fix. That payment implies an amortisation period; after the fix the payment is re-set at the reversion rate over what is left of it, and anything still owed at the end of the term is due then. With straight-line you repay the same amount of capital every month plus that month's interest, so the payment steps down, and the same capital carries on after the fix until the loan is repaid or the term ends. Full repayment is an ordinary repayment mortgage over the term, re-set at the reversion rate when the fix ends.
The true rate
The headline rate is not what the loan costs. The true rate counts the arrangement fee, any broker fee and any exit fee against the cash you actually receive, on the same basis as an APRC. Fees cost more on a short fix, because they are spread over fewer years, so compare deals on the true rate rather than the headline.
Fees: upfront, deducted or added
- Paid upfront: you pay the fee on completion and the full loan is released.
- Deducted: the lender takes the fee from the advance, so less cash reaches you.
- Added to the loan: the fee goes on the balance and is charged interest for the life of the loan.
Lenders usually cap the gross LTV including any added fee. If adding the fee takes you over the cap, the calculator reduces the net loan until it fits, and tells you by how much.
Frequently asked questions
What is a part repayment mortgage?
A loan where only part of the balance is repaid over the term and the rest is repaid or refinanced at the end. For example, a five-year loan that starts at 75% LTV and is paid down to 70% LTV. It is also called part and part, or partial amortisation.
Is interest only cheaper than repayment?
The monthly payment is lower because you only pay interest, but you still owe the whole loan at the end and pay interest on all of it for the full term. Repayment costs more each month and less in total interest.
What is the true rate of a loan?
The rate once the arrangement fee, any broker fee and any exit fee are counted against the cash you actually receive, worked out on the same basis as an APRC. It is usually higher than the headline rate, and the gap is bigger on short terms.
Should I add the arrangement fee to the loan?
Adding it means you do not pay it on completion, but it is charged interest for the life of the loan and it counts towards the lender's maximum LTV. If it takes you over the cap, the most you can borrow before fees falls.
What is a maximum gross LTV?
The highest loan-to-value a lender will allow including any fee added to the loan. A 75% gross cap with a 2% fee added means the loan before fees can only be about 73.5% of the property value.
What happens to the balance at the end of the term?
On interest only or part repayment it has to be repaid, usually by refinancing onto a new mortgage or selling. The lower LTV after part repayment can open up better rates when you refinance.