A repayment mortgage is a simple machine with unintuitive behaviour: every monthly payment covers that month's interest first, and whatever remains reduces the debt. Early on, interest dominates; late in the term, capital does. Understanding this amortisation curve — and what term length does to it — is most of what 'understanding mortgages' means.
Interest first, equity later
On a new 25-year loan, roughly half to two-thirds of the first years' payments is interest. This is why equity builds slowly at first, why overpaying early in the term saves the most, and why moving house after two years leaves you with less equity than the payments suggest. The repayment calculator shows the split for any loan.
Term length is a price dial
Stretching the term cuts the monthly payment but raises the total interest dramatically, because you rent the money for longer. The table below shows the same £200,000 loan at 5% over three terms — the 35-year option costs £73,000 more than the 25-year one over its life. Long terms are legitimate tools for affordability; they should be chosen knowingly, and shortened later when income allows.
What moves your rate
Your rate reflects the Bank of England base rate environment, your LTV band, your credit file and the product's own fees. When comparing deals, the APRC (annual percentage rate of charge) folds the headline rate and compulsory fees into one comparable number — useful for spotting when a low headline rate is funded by a high product fee.
| Term | Monthly payment | Total interest over the term |
|---|---|---|
| 25 years | £1,169.18 | £150,754 |
| 30 years | £1,073.64 | £186,510 |
| 35 years | £1,009.38 | £223,940 |
Your action list
Practical tips
- A longer term with deliberate overpayments can give the safety of a low required payment and the interest savings of a short term.
- Interest-only mortgages still exist but require a credible repayment plan — for most first-time buyers they are not the tool.
What can go wrong
- Choosing the longest term purely for the lowest monthly figure quietly adds tens of thousands of pounds of interest.
- A mortgage that only fits your budget at today's base rate is a bet, not a plan — rates move over a 25-year horizon.
- PropertySquares provides education, not financial or legal advice. Verify current rules and obtain advice for your circumstances before acting.