Use this calculator to compare the interest payments on 2 different mortgage products by comparing the interest rates.

You can use this to see how much more you would pay if your interest rate went up/down by a certain amount.

I think you’ll be shocked at how much of a difference a slight change in interest rate could make!

## How to Use the Calculator

To use this interest rate comparison calculator you’ll need to know the following things:

- Mortgage amount
- Mortgage term
- Interest rates that you want to compare

Just plug in the values as appropriate and the calculator will tell you how much more you’ll pay at the higher interest rate per month.

The calculator will also tell you how much more you’ll pay in interest over the whole term of the mortgage.

So it’s useful if you want to compare how the mortgage can affect your property investment over the long term.

**Note: This calculator only works for interest only mortgages.**

## How The Interest Payments are Calculated

The annual interest payment is worked out using the formula below:

- Mortgage amount (£) x interest rate (%)

For the monthly interest payment, you just divide the annual number by 12:

- ( Mortgage amount (£) x interest rate (%) ) / 12

To work out the total interest paid over the total mortgage term you just multiply the annual mortgage payment by the total number of years on the mortgage.

💡 So let’s use an example to show this with the following numbers:

- Mortgage Amount = £250,000
- Interest Rate = 3.5%
- Mortgage term = 25 years

Annual mortgage payment: £250,000 x 3.5% = £8750

Monthly mortgage payment: £8750 / 12 = £729.17

Total interest paid: £8750 x 25 = £218,750

To compare two different interest rates the calculator just looks at the difference between the results for each of these calculations.

## Example: Interest Payments at Different Rates

I thought I’d make a quick table of the difference in mortgage payments at different rates to show you just how much a few percentage points can make a massive difference in monthly interest payments.

**💡 Example** 💡

**Here’s a table of the different interest payments on an interest only mortgage of £200,000:**

Interest Rate (%) | Monthly Interest Payment (£) | Annual Interest Payment (£) |
---|---|---|

3.5% | £583.33 | £6999.96 |

4% | £666.67 | £8000.04 |

4.5% | £750 | £9000 |

5% | £833.33 | £9999.96 |

5.5% | £916.67 | £11000.04 |

6% | £1000 | £12000 |

6.5% | £1083.33 | £12999.96 |

7% | £1166.67 | £14000.04 |

## Further Reading

All mortgage interest rates dependent on the Bank of England base rate but it’s hard to know what they’ll be at any given time.

Luckily we’ve written a post about the **history of UK interest rates** so you can get a feel for what the long term averages are.

Equipped with this information you can make an informed decision on how you **stress test **your portfolios.