Guide · 6 min read

Why you pay so much interest in year one.

Updated May 2026

Take out a £250,000 repayment mortgage at 5% over 25 years. Your first monthly payment is £1,461. Of that, roughly £1,041 is interest and only £420 reduces what you owe. That isn't a mistake. It's how every mortgage works.

The maths in one sentence

Each month, the lender charges interest on whatever balance is still outstanding. The rest of your payment chips away at the balance. Early on the balance is high, so most of the payment is interest. Late on the balance is small, so almost all of it is principal.

The shape of the curve

For the same £250,000 / 5% / 25-year mortgage:

• Year 1: ~£12,400 of interest, ~£5,100 of capital paid off.
• Year 13 (the halfway point): roughly equal split.
• Year 25: ~£500 of interest, ~£17,000 of capital.

Total interest over the term: roughly £188,000 — about 75% of the original loan, paid back on top.

Three levers, three different effects

Term length

Stretching a mortgage from 25 to 30 years lowers the monthly payment by ~10% but increases total interest by ~25%. It buys affordability today at the price of long-run cost. The right call when income is tight; an expensive default when it isn't.

Interest rate

The most powerful lever. A single percentage point on a £250,000 / 25-year mortgage changes the monthly payment by roughly £140 and the total interest by roughly £40,000. Shopping for the best rate at remortgage time is one of the highest-return uses of an afternoon you'll ever find.

Overpayments

Most fixed-rate mortgages allow overpayments of 10% of the balance per year without penalty. Because overpayments come straight off the principal, they save you the future interest on that money for the rest of the term. £10,000 overpaid in year three of a 25-year mortgage at 5% saves you over £12,000 in interest by the end. Few investments touch that risk-adjusted return.

Repayment vs interest-only

This guide assumes a repayment (capital and interest) mortgage — the standard for residential purchases. Interest-only mortgages exist (mostly for buy-to-let now) and are exactly what they sound like: you pay only the interest each month and the full balance is still due at the end. The monthly payment is much lower; the long-term cost can be much higher.

What the calculator shows

The repayment calculator on this site uses the standard mortgage payment formula — the same one any UK lender uses to quote you. The "amortisation — start vs end" panel makes the curve visible: in year one, the bar is mostly amber (interest); by the final year it's mostly green (capital).

Try the calculator: Monthly repayment calculator →