Found that dream home? Trying to work out if you can afford it or if you need to look for something less expensive? Knowing what the specific monthly costs of, for example, a £120000 mortgage could be critical in your calculations. Having a good sense of monthly outgoings is important when planning your finances and understanding what properties are within your reach.
Unfortunately, the answer to “how much is a £120000 mortgage per month?” can’t be easily reduced to a single figure. The answer depends on several key variables that can alter your monthly payments. This guide explains some of these critical factors, how they influence costs and how you can start to get a personalised estimate.
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Why there’s never just one answer to monthly costs
It would be wonderful if every £120000 mortgage always had the same monthly payment associated with it, but the reality is far more complex.
Lenders consider a range of factors when calculating your repayments and that means that two people borrowing the exact same amount could still end up with very different monthly outgoings. Let’s explore where those differences emerge.
Four key factors influencing monthly mortgage payments
Several components will determine the monthly cost of your mortgage. Understanding them will help you see why a generic figure is often unhelpful.
1. The interest rate
Arguably the most significant factor here. The interest rate is the percentage the lender charges you for borrowing the money. Even a small difference in the interest rate can have a large impact on your monthly payments and the total amount you repay over the life of the loan. For example on a £120000 repayment mortgage over 25 years.
- At 3% interest, your illustrative monthly payment might be around £570.
- At 5% interest, that illustrative payment could rise to around £702
- At 7% interest, it could be approximately £848.
(Note: These figures are purely illustrative using hypothetical rates and do not represent actual available rates or a quote. Your actual rate will depend on your circumstances, the lender and prevailing market conditions.)
The interest rate you are offered will depend on your deposit size (Loan-to-Value) credit history, the type of mortgage product (e.g. fixed vs variable) and current market conditions.
2. The mortgage term or loan length
The mortgage term is the length of time you agree to repay the loan typically ranging from 15 to 35 years or sometimes longer.
- A shorter term (e.g. 20 years) means higher monthly payments but you’ll pay less interest overall and be mortgage-free sooner.
- A longer term (e.g. 30 years) means lower monthly payments making it initially more affordable but you’ll pay significantly more interest over the life of the mortgage
For instance, a £120000 mortgage at a 4% interest rate might have illustrative monthly payments of around £727 over 20 years versus £573 over 30 years. The difference in total interest paid would be substantial.
3. Your mortgage type matters
It’s a good moment to remind you that most residential mortgages in the UK are repayment mortgages. This means each monthly payment includes both the interest charged for that month and a portion of the capital (the original £120,000 borrowed). This ensures the loan is fully paid off at the end of the term.
Interest-only mortgages are much less common for residential homes and have very strict lending criteria. With these sorts of mortgages, your monthly payment only covers the interest, so payments are lower. However, the original £120000 mortgage remains outstanding and must be repaid in full at the end of the term via a separate credible repayment strategy. As such, for most people planning their monthly budget for a home they will live in involves a thinking about a repayment mortgage
4. Don’t forget the fees
Some mortgage products come with arrangement fees or other upfront costs. Lenders may offer the option to add these fees to the total mortgage loan. If you choose to do this for your £120000 mortgage, the actual amount borrowed will be slightly higher (i.e £120000 + £999 fee = £120999 borrowed) which will in turn slightly increase your monthly payments.
Is there any way to estimate potential monthly mortgage payments?
Given the variables involved, a generic answer is impossible to . But to get a clearer idea of what your monthly payments might be for a £120000 mortgage, or any other amount, you need to adopt a more personalised approach:
Use an online affordability calculator
You can use our free online affordability calculator here. This will allow you to input different loan amounts, interest rates and mortgage terms to see illustrative monthly payments. It’s helpful for initial budgeting and understanding how changes in rates or terms affect payments.
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Get a mortgage in principle
This is a highly recommended step. An MIP from a lender provides a more personalised indication of how much they might be willing to lend you and often an idea of the interest rates you could qualify for based on your financial circumstances and a soft credit check. This is the most accurate way to estimate your potential monthly payments before making a full mortgage application.
Speak to a Mortgage Broker
A qualified mortgage advisor can search the market for suitable products based on your affordability and provide detailed mortgage illustrations outlining the specific interest rate monthly payments and overall costs for deals you might be eligible for.
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Example scenarios to show you how it could work
To try to show how much payments can vary, here are a few hypothetical scenarios for a £120,000 repayment mortgage.
Please note: These figures are for illustration purposes only using hypothetical rates and do not represent actual available rates, current market conditions or a quote. Your actual interest rate and monthly payments will depend on your individual circumstances, lender criteria and the specific product chosen.
- Scenario 1: £120,000 mortgage at 4.0% interest over 25 years. Illustrative monthly payment of approximately £650.
- Scenario 2: £120,000 mortgage at 6.0% interest over 25 years. Illustrative monthly payment of approximately £800.
- Scenario 3: £120,000 mortgage at 4.0% interest over 30 years. Illustrative monthly payment: approximately £600.
These examples clearly show the significant impact of both the interest rate and the mortgage term on your monthly outgoings.
OneDome is here to help
Choosing a mortgage is complex but OneDome is here to help. If you have any questions about the specifics of mortgages, the wider mortgage process or want tailored advice on the different types of mortgages that suit your situation you can:
Important: Your home may be repossessed if you do not keep up repayments on your mortgage.