If you’re looking to buy a house that requires a £400,000 mortgage, you will likely want to know what your monthly repayments might be.
As an example, a £400,000 mortgage with a 25-year term and 3% interest rate will cost you around £1,897 a month.
However, this is just an estimate as the repayments on your mortgage deal will depend on a number of different factors. Keep reading to learn more and then get in touch with our team of mortgage brokers if you would like advice tailored to your situation.
How much will my £400k mortgage repayment be each month?
The cost of your monthly repayments will depend on:
- The interest rate
- The term of your mortgage
- The mortgage type
- The size of your deposit
- Your credit rating
As your repayments will depend on all of these factors, we cannot give you an exact figure here.
But if you would like to know what your monthly payments are likely to be, based on these factors, get in touch with a member of our team or use the mortgage repayment calculator below for an estimated figure.
Let’s take a closer look at the factors that affect your monthly repayments.
How does interest rate affect repayments on a £400k mortgage?
Unless you choose an interest only mortgage, your monthly payments will be made up of a portion of the loan capital and the interest rate set by your lender.
At the time of writing, lenders are offering fixed interest rates of around 4.50% but the rate you are offered will depend on a number of factors, including your credit score, the size of your deposit, and the mortgage term.
The lower your rate, the lower your repayments. As a 400K mortgage is a larger mortgage than the average getting the lowest interest rate possible is important. Sometimes it can be worth paying a higher arrangement fee to obtain a lower interest rate. We can easily calculate what is best for you. Talk to one of our experienced mortgage advisers.
If you want to benefit from the lowest rates of interest (which of course you do), you can take some of the following steps.
- Increase the size of your deposit
- Shorten the term of your mortgage
- Improve your credit score
- Use the services of a mortgage broker
How does the mortgage term affect £400k mortgage repayments?
The average term for mortgages is 25 years.
However, you can take out a mortgage over a shorter or a longer term if you prefer.
If you take out a mortgage over a shorter term, your monthly payment will be higher. This is because you will be paying off the loan capital in a shorter amount of time. Despite the higher payments, you will usually pay less interest on a shorter-term mortgage.
If you take out a mortgage over a longer term, your monthly payments will be lower. However, the overall cost of your mortgage will be higher as you will be paying interest over a longer period of time.
How long should you set your mortgage term for?
Well, that depends on what you can afford to pay each month.
If you have the financial means to take out a mortgage over a shorter term, you will pay off your loan sooner.
But if finances are tight and you want to reduce the payments on a £400,000 mortgage, you might want to take out a mortgage over a longer term.
For tailored advice, get in touch with our team. We will look at your financial position and will advise you on your best course of action.
Calculations on a £400,000 mortgage
The table below can give you an idea of what the repayments on a £400,000 mortgage might be based on the interest rate and term of your mortgage.
|Rate||5 Year Term||10 Year Term||15 Year Term||25 Year Term||35 Year Term||40 Year Term||Interest-only Payment|
The table above assumes the interest rate stays the same for the full length of the mortgage term. Interest rates will change if you remortgage or fall on to the lenders standard variable rate.
The table has been created for guidance purposes only to give you an idea of the varied repayments for a £400,000 mortgage. There will be other rate/term combinations so use a mortgage calculator to estimate what your payment costs might be or speak to our fee-free mortgage advisors.
How does the mortgage type affect £400k mortgage repayments?
The type of mortgage is another variable that can affect repayments on a £400,000 mortgage.
Which mortgage types affect mortgage monthly repayments?
Fixed-rate mortgages are popular with most people because the interest rate is set for a fixed period of time. This can make budgeting easier as there will be no sudden interest hikes over the loan duration.
If mortgage rates drop, you can remortgage to a new fixed deal at the lower rate at a later date. This will usually be at the end of your loan term as you may be hit with an early repayment charge if you decide to remortgage earlier. If you don’t move to a new deal, your mortgage will revert to your lender’s standard variable rate which will often be higher than what you were on before.
Tracker rate mortgages
The interest rate on a tracker mortgage will rise and fall in line with the Bank of England base rate. As many lenders offer discount tracker rates, your monthly payments may be lower than those on a fixed-rate mortgage. But as the rates will fluctuate at a set percentage above the base rate, there could be times when you have to pay more.
If you choose an interest-only mortgage instead of a standard repayment mortgage, your payments are only made up of interest. This can reduce the size of your monthly loan amount but you may have to pay a higher rate of interest. You will also have to pay the loan capital when your loan ends.
Which type of mortgage is best for you?
There are pros and cons to each type of mortgage so you should take these into account when considering your monthly income and personal circumstances. To learn more, check out the relevant guides on our website and get in touch with a member of our team for mortgage advice based on your situation.
How does the mortgage deposit affect £400k mortgage repayments?
With a mortgage deposit, you pay off a chunk of the property value upfront. The bigger the deposit, the less you will have to pay overall as you will have paid off more of the purchase price at the start.
Lenders are also likely to offer you cheaper mortgage deals with lower interest rates if you can make a higher deposit so your typical repayments will be more affordable than those on a mortgage taken out with a smaller deposit.
How does credit history affect £400k mortgage repayments?
With very few mortgage providers lending to customers with a low credit score, you should do all you can to improve your credit rating before you make your mortgage application.
This isn’t to say you won’t be eligible for a mortgage if you have a bad credit history as some specialist lenders will grant you a mortgage approval. However, you may be subjected to higher rates of interest and you might have to put down a bigger deposit due to the perceived risk you pose to the lender.
If you have a good credit score, you will pose less of a risk to lenders as they will assume you are less likely to default on your payments than somebody with a low credit score. As such, you will benefit from lower interest rates with the best deal on your £400,000 mortgage and this will reduce the size of your mortgage payments.
You can improve your credit score by making bill payments on time and reducing your credit card bills and other debt.
To learn more, check out our credit score guide.
What other factors affect repayments on a £400k mortgage?
We have highlighted the main factors that can affect the monthly payments on 400 000 mortgage deal. However, the monthly costs and the overall cost of your mortgage will also depend on other factors within the lending criteria. These include the following.
Your debt-to-income ratio
To calculate your affordability for a mortgage, your lender will take your earnings into account. They will work out your debt-to-income ratio, which is a measure of how much of your monthly income goes towards paying off your credit cards, finance loans, and other debts.
The less debt you have the better as your debt-to-income ratio will be lower. This is advantageous for you as you will have access to mortgages with the best deal and more competitive interest rates due to your increased level of disposable income.
Most lenders impose an age cap of 65-70 (the age you need to be when your mortgage ends) but there are some lenders who will raise that cap to 70 and above.
It’s been our observation that if you’re an older applicant, you may have to pay more on your mortgage. This is because you are less likely to be eligible for a 25-year mortgage (or longer) if you’re close to or at retirement age. As such, you will probably be asked to take out a mortgage for a shorter term and as we mentioned early, these come with higher mortgage payments.
To learn more, check out our guide on the maximum age for a mortgage.
If you’re a PAYE employee, you may be offered better rates than somebody who is self-employed, as you should have a more reliable income.
This isn’t to say you won’t be offered attractive interest rates if you’re self-employed. But as your income may be less stable than that of a PAYE employee, there is the possibility that you might be charged interest at an interest rate higher than the average figure.
Other costs that can affect your mortgage
You have to factor in more than the repayments on your £400,000 mortgage when budgeting your finances.
You also need to factor in mortgage fees such as the arrangement fee (sometimes called the booking fee), valuation fee, mortgage account fee, and the other fees that are included within the overall cost of a mortgage.
On top of these, you will have other expenses to cover. These will include the costs associated with your property, such as the estate agent fees, solicitors’ fees, homebuyers survey fees and stamp duty.
It’s important that you settle on a property and mortgage that you can afford as your home may be repossessed if you don’t pay the debt secured upon it. As such, you should take all of these costs into account before making your mortgage application.
Please note: Some mortgage brokers will also charge you a fee if you decide to purchase a mortgage using their services. This is something you need to consider when using a broker-matching service. However, YesCanDo Money is a fee-free mortgage broker so if you arrange your mortgage with us, you won’t have to pay us a penny!
How YesCanDo Money Can Help
If you’re looking to buy a house with a property value of £400,000, our specialist finance and mortgage team can help you get the best mortgage deal.
All the advisors at YesCanDo Money are knowledgeable about a range of different mortgage subjects so they will be able to tailor their advice to your situation.
Should you be looking for a £400k mortgage specifically, we will consider your approximate annual income, employment type, and the other factors we have discussed in this guide, and will let you know what the payments and overall cost of your mortgage could be.
But as it’s our goal to find you the cheapest mortgage deal, we may be able to find you a mortgage deal with a lower overall cost than our estimate. Your mortgage introducer will search the mortgage market for these deals and will let you know which lenders are likely to give you a mortgage approval.
As we are not a mortgage lender, we are not biased toward one lender or another so can promise that we only have your best interests at heart.
Get in touch
If you would like to know more, get in touch with an online mortgage advisor for a free initial conversation and tell us about your mortgage needs. Our team are fully experienced and will provide mortgage advice tailored to your needs and will give you further guidance and support should you decide to move forward with our FEE-FREE services.
You can get in touch with us about a mortgage online using the contact form below. Alternatively, give us a call or WhatsApp us to arrange your first consultation.