The cost of borrowing £1,000,000
Borrowing £1,000,000 for a mortgage is a substantial financial commitment that requires careful consideration and comparison of options before proceeding.
The amount you pay each month for a £1,000,000 mortgage depends on several key factors, such as the loan-to-value ratio (LTV), the interest rate, and the mortgage term.
The LTV is the proportion of your mortgage compared to the property’s value. A lower LTV means you’re borrowing less against the property’s value, which often leads to more favourable interest rates from lenders. You can achieve a lower LTV by increasing your mortgage deposit.
The term of the mortgage, or the period over which you pay back the loan, also plays an important role. Longer terms generally result in lower monthly payments, but you will end up paying more overall due to the accumulation of interest over time.
In the case of an interest-only mortgage, the length of the mortgage term does not affect your monthly payments. With this type of mortgage, your monthly payments only cover the interest, not the principal loan amount.
As a guide only, the tables below provide an indication of monthly repayments.
Interest only mortgage per month
| £1m Interest Only Mortgage | ||||
|---|---|---|---|---|
| 2% | 3% | 4% | 5% | |
| 10 years | £1667 | £2500 | £3333 | £4167 |
| 15 years | £1667 | £2500 | £3333 | £4167 |
| 20 years | £1667 | £2500 | £3333 | £4167 |
| 25 years | £1667 | £2500 | £3333 | £4167 |
The above figures only include the mortgage interest, there is no provision for repayment of the capital sum borrowed.
Repayment mortgage per month
| £1m Repayment Mortgage | ||||
|---|---|---|---|---|
| 2% | 3% | 4% | 5% | |
| 10 years | £9201 | £9656 | £10125 | £10607 |
| 15 years | £6435 | £6906 | £7397 | £7908 |
| 20 years | £5059 | £5546 | £6060 | £6600 |
| 25 years | £4239 | £4742 | £5278 | £5846 |
The above figures include both capital and interest combined into one monthly payment.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
What affects the monthly payment figure?
The mortgage term – The duration of your mortgage significantly affects your monthly payments. For instance, with a repayment mortgage, the amount you pay each month is calculated to clear the debt within the set term. Therefore, a 15-year mortgage will have higher monthly payments compared to a 20-year mortgage, as you’re paying off the loan faster.
The interest rate – The type of mortgage you choose impacts how interest rates affect your monthly payments. In a tracker mortgage, your payments may increase or decrease based on changes in the Bank of England’s base rate. Conversely, with a fixed-rate mortgage, your interest rate – and consequently your monthly payments – remain constant for the agreed period, regardless of market rate fluctuations.
The repayment method – There are generally two options for the mortgage repayment method:
- Repayment (capital and interest): This method involves paying both the loan amount and the interest each month.
- Interest-only: This option, which results in lower monthly payments, involves paying only the interest, without reducing the principal loan amount.
Some people opt for a ‘part and part’ mortgage, combining these two methods. A mortgage broker can provide more detailed information on how this arrangement works.
You will find more useful information in our article: How do part repayment and part interest only mortgages work?
Can you get an interest only mortgage?
An interest only mortgage is offered by most lenders, but not all. However, they will be keen to understand how you intend to pay back the mortgage before approving this request.
How much does the average mortgage cost?
When considering buying a new home or changing your existing one, it’s useful to have an idea of your potential monthly mortgage payments. The average cost can vary based on the type of property and its location.
You will find more detailed information in this guide.
What’s the best mortgage term?
The most suitable mortgage term depends on your personal circumstances. Many people choose a term of 25-30 years at the start of their home-buying journey, although some lenders may offer terms up to 40 years. Your choice will be influenced by factors such as your current age and considerations for borrowing into retirement, particularly if the mortgage extends beyond the age of 65.
How do I make my monthly payments cheaper?
You can reduce your monthly mortgage payments in several ways:
- REDUCE THE MORTGAGE AMOUNT – A little obvious but reducing the amount you borrow will decrease your monthly payments.
- EXTEND THE MORTGAGE TERM – Spreading repayments over a longer term, such as 30 years instead of 25, can lower the amount you pay each month.
- CHEAPER INTEREST RATE – By getting a better deal on your interest rate will enable your payments to reduce.
- CHANGE TO AN INTEREST ONLY MORTGAGE – This option will significantly reduce your monthly payments, but remember, you won’t be paying off the loan itself.
You should seek advice from a mortgage broker before making any of these changes.
A Guide to High Net Worth Mortgages
High-net-worth (HNW) mortgages are specialised financial products designed to cater to the unique needs of individuals seeking to finance high value properties. These mortgages involve larger loan amounts and often come with bespoke terms and conditions that reflect the borrower’s financial complexity.
FAQ
Frequently Asked Questions
Are these figures accurate?
Yes the figures are accurate. However, before considering any mortgage you should always obtain a mortgage quotation from your mortgage broker.
Why would I need a broker?
A mortgage broker’s job is to save you time by searching for the most appropriate mortgage and to then work with the lender on your behalf until the mortgage is approved.
I need to borrow more than £1m?
You may want to first use our mortgage calculator to get an idea of the monthly cost. Then contact a qualified broker who can help you source a larger mortgage.
Will I have to prove my income?
Yes, lenders need to ensure that any mortgage is affordable so they will want to see proof of your income for both employed and self-employed.
What is a part and part mortgage?
This is a repayment method that combines both interest only and repayment together. It is slightly cheaper than a full repayment mortgage. Your broker can explain this in more detail.
How much Stamp Duty will I pay?
The amount of Stamp Duty payable will be confirmed by your Solicitor. In the meantime, you may find our Stamp Duty calculator handy to give you a rough idea.
