If you’re hoping to secure a mortgage for £500,000, you might be wondering how much your monthly mortgage repayments will be, and the best way to secure the most competitive interest rates.
In this article you can use our repayments calculator below to get an idea of what the repayments could be for a mortgage of this size, find out how certain factors can influence this and 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?
This figure will depend on a few different factors (as outlined below).
But, for example purposes, a £500,000 mortgage with a term length of 25 years and using a typical interest rate available at the time of writing (October 2023) of 5.5% would work out at £3,070 per month. An experienced mortgage broker, using their knowledge from across the whole market, will be able to give you a more accurate picture.
Before you speak to a broker you can use our mortgage repayment calculator below to work out some more examples for yourself using different interest rates and loan terms.
Mortgage Repayment Calculator
Our mortgage repayment calculator can tell you how much your mortgage will cost you each month and overall. Enter the amount you’re borrowing, the term length and interest rate, and our calculator will do the rest.
Total amount paid at end of term:
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Factors that impact the monthly cost
Here are some critical areas that will help determine the monthly cost of your £500,000 mortgage:
How long you take your mortgage out for will make a noticeable difference to the payments. A longer term often means smaller payments, but you’re likely to end up paying more over the life of the loan. So, to use the example given above, a 30 year term with the same interest rate would reduce your payments from £3,070 per month to £2,839.
A higher rate of interest will naturally mean more expensive monthly repayments. Even a small difference can really add up on a mortgage this size. So, again using the example above, an interest rate of 5% over the same term would see your payments reduce to £2,684 per month.
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 size of deposit will also be influential.
When setting up the mortgage, some of the options you can look at are a fixed rate vs tracker mortgage. A tracker mortgage can be a bit cheaper, but your payments could rise in line with interest rates. Fixed rate gives you more stability, but likely a higher monthly cost.
You might also be able to get an interest-only mortgage, which would be the cheapest in terms of monthly payments, but harder to secure for a residential property. A separate repayment vehicle would also be needed to pay back the full capital amount at the end of the term.
Other eligibility factors can have an indirect impact on your monthly mortgage payments. The following can affect the amount of lenders and deals you qualify for, as well as determine the interest rate you end up with.
The type of property you’re planning to buy can also affect your monthly mortgage payment. If the building is a non-standard construction, the number of lenders will be restricted, meaning the rate you have to accept could be higher due to a smaller pool of lenders being available.
A bigger deposit can have two effects. Firstly, it reduces the amount you need to borrow, which can lead to lower repayments. Secondly, a larger deposit means a lower loan-to-value (LTV) ratio. This reduces the perceived risk for lenders and is typically where they reserve their lowest interest rates.
Your working situation can impact your mortgage repayments indirectly by reducing the number of lenders willing to consider your application. Whether you’re an employee or self-employed, your level of salary, and your profession can all make a difference.
This is why it’s worth dealing with a lender who fits your profile to ensure you get the best deal and a mortgage broker will be able to help find the right one.
Lenders will take a look at your credit history during the application process. So it’s worth downloading all your credit reports in advance to check through them for errors or areas for improvement.
If you have bad credit, it’s useful to deal with a lender who will still give you a top loan with affordable monthly payments, as many lenders charge higher rates under these circumstances.
How a mortgage broker can help
Navigating the choice of lenders and deals available can involve a lot of legwork. But, finding the right lender for your circumstances is so important if you want to get the best deal possible for your mortgage.
That’s why your next step should be to speak to a mortgage broker. Make an enquiry with us and our free broker-matching service can match you with the right advisor straight away.
They’ll be able to help with:
- Finding the right lender offering the best rates. Your broker can save you a lot of time and, potentially, some money too by identifying the mortgage lenders currently offering the most competitive interest rates available across the market.
- Downloading and optimising your credit reports. Before you apply 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.
- Preparing your paperwork. Your broker will be able to point out all the relevant documentary evidence required for your mortgage application – proof of income, address and ID, copies of bank statements etc. – so your mortgage application is as strong as it can be before you submit it.
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Example calculations for a £500,000 mortgage
Below are some examples to show what your payments could be for a mortgage this size, illustrating how different factors can change the monthly cost.
Estimated monthly costs for a repayment mortgage with a 20% deposit:
Monthly mortgage payment for an interest-only £500,000 mortgage:
For the purpose of this table we are assuming the interest rate stays the same for the full length of the mortgage. Interest rates can change, if you decide to remortgage on to a different rate or move from either 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% (October 2023) and the average mortgage rates between 5%-6% the repayment figures for these columns in the table above would be the most realistic at present. However, as and when the base rate is reduced mortgage lenders should follow suit and bring their rates down too.
Additional mortgage costs to consider
There are a few other costs to factor into your total payment calculations when taking out a £500,000 mortgage:
Most mortgages come with fees to pay when setting it up and larger mortgages such as this could result in higher fees. This can include a booking fee, an arrangement fee, and a valuation fee. If you lump these costs onto your mortgage, it can mean nothing to pay upfront, but it will increase how much you pay each month.
You can read more about these fees, and how much they could be, here.
It’s worth thinking about the additional costs of any insurance you may need for your payments. This can include life insurance to cover the mortgage if you die, income protection if you’re unable to work, or critical illness cover to help with costs if you get diagnosed with a serious condition.
Depending on the value of the home and if it’s your first home, you’ll have to pay a level of stamp duty. You can read all about the potential implications here.
These charges will often be paid during the process. So, it won’t affect the monthly payments for your £500k mortgage, but it is an extra cost to factor into your calculations.
Get matched with a broker experienced in larger mortgages
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 and they 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.
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