What this calculator does
Takes two mortgage deals (loan amount, rate, term, arrangement fee). Returns monthly payment, total cost of credit, and total cost including fees for each, plus the difference between them.
The formula
Monthly payment for each mortgage:
M = P × [r(1+r)^n] / [(1+r)^n − 1]
Where:
P = loan amount (£)
r = monthly interest rate (annual rate / 12)
n = total months (years × 12)
Total repayable = M × n
Total interest = Total repayable − P
Total cost = Total repayable + arrangement fee
(fee assumed paid upfront or added to loan — user selects)
Break-even months (where rates differ):
BE = arrangement_fee_difference / monthly_payment_difference
Assumptions
- Each mortgage is fixed-rate for the full comparison period entered.
- No overpayments are made during the comparison period.
- The arrangement fee is either paid upfront or added to the loan, as specified by the user. If added to the loan, interest accrues on the fee amount.
- Both mortgages are compared over the same period and loan amount.
Data sources
No external regulatory data sources are used. This calculator applies a standard mortgage amortisation formula. Rates and fees are entered by the user.
Limitations
- Compares over a specified initial period only (for example, a 2-year fixed deal) — does not model what happens at the reversion rate after the fixed term ends.
- Does not include buildings insurance, life cover, or broker fees, which add to the true cost of each mortgage.
- Does not model portability — if you move home during the fixed period, early repayment charges may apply.
- Break-even calculation ignores the time value of money — it is a straightforward payback period, not a net present value calculation.
Worked example
Both mortgages: £200,000 loan over 25 years.
Mortgage A: 4.2% rate, £999 arrangement fee
r = 4.2% / 12 = 0.35% = 0.0035
n = 25 × 12 = 300
M = £200,000 × [0.0035 × (1.0035)^300] / [(1.0035)^300 − 1]
≈ £1,081/month
Total repayable: £324,300
Total cost (inc. fee): £325,299
Mortgage B: 4.6% rate, no arrangement fee
r = 4.6% / 12 = 0.383% = 0.00383
M ≈ £1,116/month
Total repayable: £334,800
Over 25 years, Mortgage A saves £9,501 despite the higher upfront fee.
Break-even on fee: £999 / (£1,116 − £1,081) = 28.5 months (approx 2 years 5 months)
Changelog
| Date | Change |
|---|---|
| May 2026 | Initial publication |