How much should my mortgage balance go down each year?
Less than you might expect at first, then more each year. At 5% over 25 years a £200,000 repayment mortgage comes down by about £4,100 in year one, £6,500 in year ten and £10,600 in year twenty, because the payment stays level while the interest inside it shrinks.
A repayment mortgage is built so the payment stays the same for the whole term. Inside that payment, the share going to interest starts large and shrinks as the balance falls, so the amount coming off the balance grows every year. There is no single right figure for a year: it follows from your balance, rate and remaining term.
The figures, year by year
At 5% over 25 years, with interest charged monthly on the balance, the capital repaid in a year comes out like this:
- £150,000 (about £877 a month): £3,100 in year one, £3,800 in year five, £4,800 in year ten and £8,000 in year twenty.
- £200,000 (about £1,169 a month): £4,100 in year one, £5,000 in year five, £6,500 in year ten and £10,600 in year twenty.
- £250,000 (about £1,461 a month): £5,200 in year one, £6,300 in year five, £8,100 in year ten and £13,300 in year twenty.
After five years, £200,000 is down to about £177,200: roughly £22,800 paid off from about £70,000 paid in. After ten years it is about £147,800, and at year fifteen about £110,200 — more than half the loan is still outstanding after more than half the term.
What changes the figure
- The rate. At 4% the same £200,000 comes down by about £4,800 in year one; at 6%, about £3,600. A higher rate means more of each payment goes on interest.
- The term. Over 30 years at 5%, year one takes off about £3,000 rather than £4,100. The monthly payment is lower, and so is the capital repaid in it.
- Where you are in the term. The same mortgage repays more capital each year than the year before, so this year compared with last year always shows some growth.
- Overpayments. These come straight off the capital, on top of the figures above.
Checking yours
Your annual statement shows the balance at the start and end of the year; the difference, less anything added, is what came off. If it is well below the figures above for a similar balance and rate, why is my mortgage balance not going down sets out the usual reasons, and why has my mortgage balance gone up the less usual ones.
The mortgage overpayment calculator works out your own figures from your balance, rate and term without signing in, and Mortgage Meadow tracks the real balance month by month.
Questions people ask
How much of my first mortgage payment goes off the balance?
On £200,000 at 5% over 25 years, about £336 of a £1,169 payment; the other £833 is interest. The capital share grows each month as the balance falls.
When does a mortgage start going down faster?
It speeds up steadily rather than at one point, because each month's interest is charged on a slightly smaller balance. On £200,000 at 5% over 25 years, the capital repaid in a year first passes the interest charged in year twelve.