How To Work Out Monthly Repayments On £400K Mortgage?

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Applying for a mortgage is complicated because you need complete confidence in two things. First, that the house you’re considering purchasing is the perfect one for you, and second, that your monthly mortgage repayments on a £400,000 mortgage is something you can afford. Mortgage lenders will only offer you a loan of this amount if they’re certain your monthly payments will be met.

To help you determine if a £400,000 mortgage is right for you, we’ll explore different factors affecting monthly repayments and show you some accurate examples to give you a better idea about what a typical £400,000 mortgage will look like each month in terms of mortgage repayments.

*All figures marked with ~ throughout the article are accurate estimates, although final repayment amounts won’t always be the same if you apply for a similar deal due to changing interest rates and mortgage deals.

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Can I Afford £400,000 Mortgage Repayments?

In truth, ultimately it isn’t you that makes that decision. The mortgage lender you apply to will need to conduct their own affordability assessments to ensure you can. Our guide today will give you a good idea about the different monthly repayments you could expect on a 400K mortgage based on mortgage type, interest rate, and mortgage term, so by the end of the post you should have an idea about whether or not you’ll realistically pass a lender’s affordability assessment to begin with, but it’s the lender that has the final say.

The first part of their assessment will involve looking at what you earn each month, and what you spend each month. Typically this will be over the three month period prior to your application. Your income and outgoings will be looked at in detail to ensure you can afford the repayments.

And the final part of the assessment is a stress test. Here, they’ll look at your ability to afford monthly repayments should your circumstances change – e.g. if you’re applying for a mortgage with somebody else and your dual income household dropped to a single income household, could you still afford the payments?

Combined, these two things will tell lenders whether you can afford to borrow £400,000 for your mortgage.

Will I Be Approved With Bad Credit?

Your credit history is important to lenders because it tells them how much of a risk you are in terms of repayment. If circumstances in your past have led to a poor credit history and lower credit score, then you would ordinarily struggle to find a lender who would allow you to take out a £400,000 mortgage.

However, at When The Bank Says No, we’re a team of specialist mortgage brokers with connections to specialist lenders who want to understand the story behind the credit history. With our help, you may be able to show lenders that your circumstances now are different and you’re more than capable of making monthly repayments.

These types of mortgages typically carry higher interest rates to start with, but we can also help you remortgage to a better deal when your reliable monthly payments help build your credit score back up.

If you want to find a lender who is willing to consider your mortgage application despite bad credit, then working with a mortgage broker is the key. We’re more than happy to help.

What Influences Monthly Repayments On A £400,000 Mortgage?

The four main factors that will affect your monthly repayments are:

  • the interest rate you pay each month
  • the mortgage term length
  • the type of mortgage you have
  • the deposit you put towards the property value

How Does The Interest Rate Affect Mortgage Repayments?

There are different ways that interest rates can affect your mortgage depending on the interest rate deal you have.

Some opt for a lender’s standard variable rate mortgage, which means that as the Bank of England’s base rate in the UK goes up and down, so too will your monthly payments to reflect that. This can be an excellent way to save money when rates are low, but it’s also risky because it leaves you susceptible to higher monthly mortgage repayments when interest rates rise.

Others opt for a fixed rate mortgage, where you lock into an interest rate for a set period of time – typically 2, 3, 5, or 10 years. Here you’ll repay a set amount in interest rate and capital repayments to cover your loan during the time period, after which, you’ll need to sign a new agreement if you want to be fixed again. Fixed rates are more reliable but you could end up paying more in interest than others when rates drop because you’ve locked in at a higher rate.

The rates you pay each month in interest will directly impact the total monthly mortgage repayments.

What Mortgage Term Length Is Best For Lower Monthly Repayments?

How long your take your mortgage deal over – i.e. the mortgage term length – directly affects monthly mortgage payments because it affects how much time you have to actually pay back the mortgage loan in full.

The longer your term length, the smaller your monthly payments will be because you have longer to pay back the capital (the actual amount of the loan, without interest). The shorter your term length, the higher your monthly mortgage repayments will be because you have a shorter amount of time to pay back the loan value.

Here’s a clearer example:

  • £400,000 mortgage over 20 years with a 2.5% interest rate = ~£2120 per month (with a total repayment amount of £508,760)
  • £400,000 mortgage over 5 years with a 2.5% interest rate = ~£7099 per month (with a total repayment amount of £425,949)

Paying back over a longer period gives you more wriggle room in terms of monthly payment, but it does mean you’ll pay more back in interest over time. Find the right balance though, and you’ll have monthly payments you can afford without paying interest in too large amounts.

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Which Mortgage Type Is More Expensive Each Month?

A repayment mortgage is fairly standard, meaning you’ll pay both what you’ve borrowed back each month, as well as any interest owed. With an interest only mortgage, you’ll simply be covering the interest each month.

Of course, a repayment mortgage will have higher payments each month because you’re actually paying back what you owe at the same time. An interest only mortgage will be less for you each month, but you’ll ultimately end up paying more in interest over the course of your mortgage if you switch to this mortgage type part way through your mortgage.

Most lenders will only allow you to switch to interest only if your personal circumstances have changed and you need a break before returning to your normal repayment mortgage later on. For example, if your monthly income drops to one wage rather than two.

Your mortgage type affects your mortgage repayments massively, so be sure to consider your options.

How Much Deposit Should I Put Down For Greater Savings?

The larger your deposit for a home, the better. If your home’s property value is £450,000, then a £50,000 deposit will mean you need to take out a £400,000 mortgage to cover the cost of the home. If you put down a smaller deposit, you would need to borrow more and therefore pay more back each month.

If you were, however, able to put down an even larger deposit, then you would need a smaller mortgage and therefore enjoy even lower monthly costs. Finding the right balance is the key again.

What Is The Best Way To Work Out Mortgage Repayments For A 400K Mortgage?

The single best way to work out how much your monthly charges are likely to be for a 400K mortgage is to use a mortgage repayment calculator. An online mortgage calculator in the UK will provide an accurate monthly estimate for your repayments based on a range of factors, and the only information you need to get started is your mortgage:

  • Amount
  • Term
  • Type (Interest Only vs Repayment)
  • Interest Rate
  • Fees

To give you a better idea about the sort of monthly charges you can expect for a 400K mortgage, though, we’ll provide some accurate examples below.

How Much Will I Pay Each Month For A £400,000 Mortgage?

Likely Monthly Payments On A £400,000 Mortgage By Varying Interest Rates And Mortgage Type (All Figures Given Are Accurate Estimates Only ~)
Interest Rates
Mortgage Type Mortgage Term 2.5% 3.5% 4.5% 5.5%
Repayment 5 Years £7099 £7277 £7457 £7640
10 Years £3771 £3956 £4145 £4341
15 Years £2667 £2860 £3059 £3268
20 Years £2120 £2321 £2530 £2751
25 Years £1795 £2003 £2222 £2456
30 Years £1581 £1797 £2026 £2271
Interest Only ALL £834 £1168 £1499 £1833

Taking out a mortgage of this size can be quite daunting, but if you can find the right mortgage deal for you based on interest, term, and type, then you could find that it’s more manageable than you first realised.

How much it will cost for you specifically will vary from the figures above, because your deal will be different. However, they should serve as an accurate guide in helping you understand the likely monthly costs of a mortgage of this size.

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Should I Use A Mortgage Broker For A Large Mortgage?

Yes. And yes, we are mortgage brokers so we’re bound to say that, but if you want to increase your chance of mortgage approval then a broker is the best way to go.

At When The Bank Says No, we offer our services to individuals who might otherwise struggle to find a mortgage because of employment status, credit history, etc.

We can help get your mortgage approved by putting you in touch with specialised lenders that are willing to understand your circumstances and the other factors surrounding repayment to help you get the mortgage you deserve.

Repayments On A £400,000 Mortgage Summary

Whilst all figures provided today are based on typical repayments and so should be treated with some caution, they do provide an accurate estimate of the sort of payments you can expect to make each month if you choose similar mortgage options to the ones laid out.

Of course, the best deal for one borrower will look very different to the best deal for another, and a smaller or larger mortgage will affect repayment, but our guide today should prove useful to many of you.

If you need further support in applying for a mortgage then work with us today. We can help you secure a mortgage, even When The Bank Says No.

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Emma Jones
Emma Jones
Emma began her career in Lloyds Banking Group, first in the unsecured & secured loans department at Halifax and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the banks let their customers down by denying loans and mortgages. Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money. Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. One thing Emma has learned through her own personal struggles is every client must be treated like a human and understood better by advisors and lenders in the industry. “We all have to navigate life events which can ultimately impact your financial status. It shouldn’t mean dreams of homeownership or business growth should have the breaks applied”. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.