Monthly Repayments on a £500,000 Mortgage

Repayments on a £500,000 mortgage will vary depending on your mortgage type. Your mortgage repayments will be determined by the length of your term, interest rate, and the type of mortgage you get.

A longer term will mean smaller monthly repayments but will result in you paying more in the long term. The higher the interest rate, the more you’ll pay and if you get an interest-only mortgage, for example, you’ll only repay the interest on the money you’ve borrowed.

In this article, we’ll look at the monthly repayments you can expect for a £500,000 mortgage, the annual income, and the deposit amount you’ll need to apply for this mortgage. As well as why using an experienced mortgage broker can be a smart way of securing the most favourable terms from across the market.

How much does a £500,000 mortgage cost per month?

At the time of writing (April 2024) the average monthly repayments on a £500,000 mortgage are £2,923. This is based on current interest rates being around 5%, a typical mortgage term of 25 years, and opting for a capital repayment mortgage. Based on this, you would repay £876,885 over the mortgage term.

However, if you secure a mortgage with a longer term, this will result in smaller monthly repayments but you’ll pay more in total over the term of the mortgage.

Speak to one of our expert mortgage brokers for a representative idea of what you might repay. A good broker will guide you through the process understanding your personal circumstances and help you get the best possible deal, which could result in lower repayments.

How much do you need to earn to get a £500,000 mortgage?

The amount you can borrow is based on your salary. Most lenders will loan around 4 or 4.5 times your annual income. To be approved for a £500,000 mortgage, you’d need an annual income of around £111,000-£125,500. This is significantly above the average UK annual salary, currently £34,900 (April 2024).

That may seem high, but if you’re getting a joint mortgage with your partner, your combined earnings can be used for this calculation.

Some lenders may also be willing to offer 5 times or possibly even 6 times annual salary. However, the latter is often reserved for certain professions, such as doctor or lawyer, as they have a higher and more reliable income.

In these circumstances, it’s best to consult with a broker who can indicate which lenders can offer this and whether you’d likely qualify.

This table shows how your income and the provider’s income multiples combine to show your maximum borrowing capacity:

The above table is for comparative purposes only. Talk to your mortgage lender or broker for the most up-to-date information on affordability criteria.

If you’d like to test this for yourself, based on your annual income, take a look at our mortgage affordability calculator below:

How much deposit do you need for a £500,000 mortgage?

Currently, the minimum deposit requirements imposed by lenders for a residential mortgage are between 5%-10% – this is based on the property value NOT the mortgage amount.

You’d need a minimum deposit of between £25,000-£50,000 if you were buying a property worth £500,000 (rather than borrowing this amount), which would result in a mortgage between £475,000-£450,000.

It’s not completely out of the question to secure a mortgage for £500,000 with no deposit at all, but this is extremely rare.

You may need a higher deposit of 25% if you have issues with bad credit or are looking for a mortgage involving a non-standard construction property. It’s important to note, factors such as these two examples will reduce the pool of lenders available.

Most lenders ask for a minimum of 20% for a buy-to-let mortgage, although a mortgage broker with experience in this area can identify some who will ask for less.

The higher your deposit, the more likely you are to qualify for the most competitive interest rates. This is because you will have a lower loan-to-value (LTV) ratio, which wouldn’t be the case with a lower deposit.

You can see how this works on our calculator below.

How to get a £500,000 mortgage

Once you’ve found a property and made some calculations, the next step in your mortgage application should be to find a mortgage broker with experience in arranging mortgages of this amount. This will boost your chances of getting your mortgage approved at the best terms available.

Using our free broker-matching service you can speak to the right broker by simply enquiring online.

They’ll be able to help with:

• Deposit requirements: You’ll need to save a minimum deposit of 5% to 10% for a £500,000 mortgage. How much this figure will be depends on the value of the property, but a 10% deposit on a £500,000 house would be £50,000. A simple way to help you save money for a deposit is to set up a savings account and put a percentage of your monthly wage, around 10 to 15%, into the account each month.
• Downloading and optimising your credit reports: Before applying, it’s important to check your credit history to make sure no bad credit issues exist and remove any inaccurate or outdated information that could hinder your chances of securing the mortgage you need.
• Gathering all the necessary paperwork required for your application: Your broker will be able to guide you through the application process and all the typical documents required – proof of income, at least three months of bank statements, personal ID, proof of address, evidence of deposit, latest P60 form etc.
• Working out how much you can borrow: You may have set your sights on a £500,000 mortgage, but can you borrow that amount? A mortgage broker using typical lender salary multiplier calculations can confirm this.
• Finding the right lender and securing the best deal for you: Your broker can save you a lot of time and, potentially, some money by identifying the mortgage lenders currently offering the most competitive interest rates available across the market.
• Helping you through the Mortgage Process: Applying for a mortgage can be challenging, especially if it’s your first application. The right mortgage broker can assist you with any issues you may encounter along the way, safeguard your interests, and provide support if anything goes wrong.

Example monthly repayments for a £500,000 mortgage

The table below shows how much impact the interest rate and term of your mortgage can have on your repayments on a £500k mortgage.

For the purpose of this table, we assume the interest rate stays the same for the entire length of the mortgage. Interest rates can change if you decide to remortgage to a different rate or move from a fixed or discounted deal on to the lender’s standard variable rate (SVR).

With the Bank of England base rate currently at 5.25% and the average mortgage rates between 5%-6%, the repayment figures for these rows in the table would be the most realistic at present. However, if the base rate falls in the future, mortgage lenders should follow suit and reduce their rates too.

Factors that affect monthly repayments

Repayments on mortgages can be impacted by the following factors, both directly and indirectly:

Term length

Extending the term is one way to reduce the monthly repayments on your potential £500k mortgage. However, you will end up paying more interest over the entire life of the mortgage than you would with a shorter term.

Traditionally mortgages are 25 years, but lenders may go up to 30, 35, or even 40 years in some circumstances. Using the table above, a 20-year term at 6% works out at £3,582 per month, but if you choose a 30-year term this reduces your payments to £2,998 per month.

Interest rate

A higher rate of interest will naturally mean more expensive monthly repayments. Even a small difference can add up on a mortgage this size. So, using the examples from above, an interest rate of 4% over a 20-year term and 30-year term would reduce your payments to £3,030 and £2,387 per month respectively.

A mortgage broker will be able to help you gain access to the best rates available across the market. The strength of your application and the size of the deposit will also be influential.

Mortgage type

The type of mortgage you secure can impact how your interest is calculated. The most popular choices would be:

• Fixed-rate mortgage: This type of mortgage has a set interest rate over a pre-agreed period. In practice, your monthly repayments stay the same over that timescale. At the end of the fixed term, you can negotiate a new fixed rate or revert to the standard variable rate.
• Tracker mortgages: Unlike fixed-rate mortgages, a tracker rate will vary in line with the Bank of England base rate – which means your repayments can go up or down.

Interest-only vs. capital repayment

The mortgage repayment method will also have a bearing on how much your mortgage will cost each month. Most mortgages are capital and repayment, which means you would pay back some of the loan plus interest each month.

The alternative to this is interest-only. With this method, you only need to settle the interest each month and pay off the full loan balance at the end of the term using a pre-agreed repayment vehicle.

Interest-only mortgages come with lower monthly repayments but can cost more overall due to the loan amount remaining constant throughout the agreement.

For a £500,000 mortgage, with an interest rate of 5% and a term length of 25 years, your repayments would be £2,083 per month on an interest-only basis, while on a capital and repayment agreement, they would be £2,923.

The table below shows what your monthly repayments would be on an interest-only mortgage with varying rates:

Deposit

The larger your deposit when borrowing £200,000, the better your loan-to-value (LTV) ratio. When your LTV is lower, you will have more choices of providers offering their most competitive rates.

Your credit history

If you’ve had bad credit in the past, you may find that you have fewer providers offering you a rate that is affordable to you. Providers see you as a slightly higher risk so you may have to accept a higher rate than you had wanted. As a result, your monthly mortgage costs could go up.

Additional mortgage costs to consider

When you’re looking for a mortgage, whatever the amount, there are a few more fees and costs to consider besides the monthly repayments.

For example:

• Arrangement fee: can be anywhere from £0-£2,000. As the name suggests this is a fee for arranging your mortgage and can, in certain cases, be added to your loan.
• Valuation fee: usually between £250-£1,500 depending on the complexity of the valuation required. Some lenders will offer this fee for free as part of their overall package.
• Early repayment charges (ERCs): most lenders will allow you to overpay by an additional 10% per annum. If you go beyond this then ERCs can apply and can be anywhere between 1%-5% of the mortgage balance. These are more commonplace when you break from a specific mortgage deal before the end of the term.
• Solicitors fees: If you need a mortgage, you will need to instruct a solicitor to conduct all the conveyancing requirements.
• Stamp duty: This is the tax levy on residential property purchases. The tax rates are tiered – the higher the purchase price, the higher the percentage you are charged.

In addition to the above, you should also factor in other costs such as buildings/contents insurance, life insurance to cover the mortgage balance and broker fees (if you decide to use their services – typical fees for a broker would be either a flat fee of between £500-£1,000 or a percentage of the amount borrowed of up to 1%.)

Why use Online Mortgage Advisor?

Finding an experienced broker who has helped numerous clients find affordable £500,000 mortgages can take a lot of research and effort. Luckily, the brokers we work with are industry experts who can introduce you to the right lender from day one.

We offer a free, broker-matching service. This means we’ll quickly assess your situation, and then pair you up with an expert advisor who’ll find you the best home loan – regardless of the amount – with the lowest repayments.

Just call 0808 189 2301 or make an enquiry. We’ll arrange a free, no-obligation chat between you and your ideal mortgage broker today.