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Mortgage Practice Questions

Build confidence with realistic UK mortgage scenarios before relying on a calculator estimate. Filter by topic or difficulty, try the question first, then reveal the step-by-step solution.

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Questions are grouped for repeat practice: beginner checks, intermediate calculator maths, and advanced comparison scenarios.

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7 questions with hidden step-by-step solutions.

AffordabilityBeginner

Estimate a search budget from income and deposit

Scenario

Maya earns £48,000 and Leo earns £34,000. They have a £52,000 deposit and want a rough upper search budget before speaking to a broker. A simple planning multiple is 4.25x combined income.

Question

What property budget does the income multiple suggest, and what loan-to-value would that create?

Hint: Start with combined income, multiply by the planning multiple, then add the deposit and divide borrowing by the property budget.

Review the affordability lessonTry the affordability calculator
Reveal step-by-step solutionShow

The income multiple suggests borrowing of £348,500, a property budget of £400,500, and an estimated LTV of about 87.0%.

  1. Combine the income

    Add both gross annual incomes before applying the planning multiple.

    \[£48{,}000 + £34{,}000 = £82{,}000\]

  2. Apply the income multiple

    Multiply combined income by the illustrative borrowing multiple.

    \[£82{,}000 \times 4.25 = £348{,}500\]

  3. Add the deposit

    The estimated property budget is the borrowing estimate plus the saved deposit.

    \[£348{,}500 + £52{,}000 = £400{,}500\]

  4. Estimate loan-to-value

    LTV shows the share of the property price funded by the mortgage.

    \[£348{,}500 / £400{,}500 \times 100 = 87.0\%\]

Related questions

Deposit plus SDLTBeginner - Buying CostsMonthly repayment estimateIntermediate - Repayments
Buying CostsBeginner

Work out deposit and stamp duty cash needed

Scenario

A first-time buyer is considering a £425,000 home in England. They plan a 15% deposit and qualify for first-time buyer stamp duty relief.

Question

How much cash is needed for the deposit and estimated stamp duty before other buying costs?

Hint: Calculate 15% of the price first. For first-time buyer relief, only the amount above £425,000 would be taxed in this simplified scenario.

Review the stamp duty lessonTry the stamp duty calculator
Reveal step-by-step solutionShow

A 15% deposit is £63,750. With the price at the first-time buyer relief threshold in this scenario, estimated SDLT is £0, so deposit plus SDLT is £63,750.

  1. Calculate the deposit

    Multiply the purchase price by the planned deposit percentage.

    \[£425{,}000 \times 15\% = £63{,}750\]

  2. Check the relief threshold

    This scenario assumes first-time buyer relief applies, and the price is not above the relief threshold used in the lesson example.

    \[\text{Taxable amount above threshold} = £425{,}000 - £425{,}000 = £0\]

  3. Add deposit and stamp duty

    Only deposit and SDLT are included here; conveyancing, surveys, moving costs, and lender fees are separate.

    \[£63{,}750 + £0 = £63{,}750\]

Related questions

Income and deposit budgetBeginner - AffordabilityFixed deal comparisonIntermediate - Mortgage Comparison
RepaymentsIntermediate

Estimate a monthly repayment from balance, rate, and term

Scenario

A homeowner wants to borrow £235,000 on a repayment mortgage over 25 years at an illustrative fixed rate of 4.8%.

Question

Using the repayment mortgage formula, what is the estimated monthly payment?

Hint: Use the monthly rate and total number of monthly payments: r = 4.8% / 12 / 100 and n = 25 x 12.

Review the repayment lessonTry the mortgage repayment calculator
Reveal step-by-step solutionShow

The estimated monthly repayment is about £1,347, assuming the 4.8% rate applied for the whole 25-year term.

  1. Convert the rate and term

    The annual rate needs to be converted into a monthly decimal, and the term into months.

    \[\begin{aligned}r = 4.8\% / 12 / 100 = 0.004 \\ n = 25 \times 12 = 300\end{aligned}\]

  2. Use the repayment formula

    Put the balance, monthly rate, and number of payments into the standard repayment formula.

    Repayment formula
    \[M = P \times r / (1 - (1 + r)^-n)\]

  3. Calculate the payment

    Substitute the mortgage balance into the formula.

    \[M = £235{,}000 \times 0.004 / (1 - (1 + 0.004)^-300) = £1{,}346.74\]

  4. Round for planning

    For a planning estimate, round to the nearest pound and remember that product fees and future rate changes are excluded.

    \[\text{Estimated monthly payment} = \text{about £1,347}\]

Related questions

Fixed deal comparisonIntermediate - Mortgage ComparisonOverpayment interest effectIntermediate - Overpayments
Mortgage ComparisonIntermediate

Compare two fixed-rate deals with different fees

Scenario

Nadia needs a £210,000 mortgage over 25 years. Deal A has a 4.25% rate and a £999 product fee. Deal B has a 4.45% rate and no product fee. She is comparing the first 24 months.

Question

If Deal A costs about £1,138 per month and Deal B costs about £1,163 per month, which has the lower two-year payment-plus-fee cost?

Hint: Multiply each monthly payment by 24, then add any product fee.

Review the mortgage comparison lessonTry the mortgage comparison tool
Reveal step-by-step solutionShow

Deal B is lower by about £399 over the first two years on payment-plus-fee cost, before considering balances, eligibility, and future rates.

  1. Calculate Deal A's two-year cost

    Multiply the monthly payment by the comparison period, then add the product fee.

    \[£1{,}138 \times 24 + £999 = £28{,}311\]

  2. Calculate Deal B's two-year cost

    Deal B has no product fee, so the two-year payment total is the modelled cost in this simplified comparison.

    \[£1{,}163 \times 24 + £0 = £27{,}912\]

  3. Compare the totals

    Subtract the lower cost from the higher cost to see the gap.

    \[£28{,}311 - £27{,}912 = £399\]

  4. Interpret carefully

    Deal B is lower on this simple two-year payment-plus-fee view, but a full comparison should also check remaining balance, incentives, ERCs, and what happens after the fixed period.

Related questions

Remortgage break-evenAdvanced - RemortgagingMonthly repayment estimateIntermediate - Repayments
OverpaymentsIntermediate

Estimate how an overpayment changes next month's interest

Scenario

A borrower has a £180,000 mortgage at 4.2% and is considering a one-off £5,000 overpayment. They want to understand the immediate monthly interest effect.

Question

Roughly how much less interest would be charged next month after the £5,000 overpayment?

Hint: Compare monthly interest on £180,000 with monthly interest on £175,000 at 4.2%.

Review the overpayment lessonTry the overpayment calculator
Reveal step-by-step solutionShow

The one-off overpayment reduces next month's estimated interest by about £17.50, with larger savings building over time if the lower balance remains.

  1. Calculate monthly interest before overpaying

    Use the current balance, annual rate, and one month of interest.

    \[£180{,}000 \times 4.2\% / 12 = £630.00\]

  2. Reduce the balance by the overpayment

    The overpayment lowers the balance charged interest in the next monthly estimate.

    \[£180{,}000 - £5{,}000 = £175{,}000\]

  3. Calculate monthly interest after overpaying

    Apply the same rate to the lower balance.

    \[£175{,}000 \times 4.2\% / 12 = £612.50\]

  4. Find the immediate difference

    The monthly interest reduction is the difference between the two estimates.

    \[£630.00 - £612.50 = £17.50\]

Related questions

Offset interest reductionAdvanced - Offset MortgagesMonthly repayment estimateIntermediate - Repayments
RemortgagingAdvanced

Check a remortgage break-even point after fees

Scenario

A homeowner can switch to a cheaper deal that saves an estimated £82 per month, but switching costs are £1,640 after product, legal, valuation, and exit fees.

Question

How many months would it take for the monthly saving to recover the switching costs?

Hint: Break-even months are switching costs divided by estimated monthly saving.

Review the remortgage comparison lessonTry the remortgage calculator
Reveal step-by-step solutionShow

The break-even point is 20 months. The switch only starts to show a net saving after that point in this simplified model.

  1. Identify switching costs

    Use the total cost that must be recovered by the monthly saving.

    \[\text{Switching costs} = £1{,}640\]

  2. Identify the monthly saving

    Use the modelled monthly reduction between the current deal and the new deal.

    \[\text{Monthly saving} = £82\]

  3. Divide costs by monthly saving

    This gives the number of months needed to recover the upfront costs.

    \[£1{,}640 / £82 = \text{20 months}\]

  4. Interpret the result

    If the homeowner expects to keep the new deal beyond 20 months, the switch may show a net saving in this simplified model. If they move or switch again earlier, fees could outweigh the monthly saving.

Related questions

Fixed deal comparisonIntermediate - Mortgage ComparisonOffset interest reductionAdvanced - Offset Mortgages
Offset MortgagesAdvanced

Estimate an offset mortgage interest reduction

Scenario

A homeowner has a £260,000 offset mortgage at 4.5% and keeps £30,000 in linked savings. The savings remain accessible but reduce the balance charged interest.

Question

What balance is charged interest, and how much monthly interest is avoided compared with no offset savings?

Hint: Subtract linked savings from the mortgage balance, then compare monthly interest on £260,000 and £230,000.

Review the offset comparison lessonTry the offset mortgage calculator
Reveal step-by-step solutionShow

Interest is charged on £230,000 instead of £260,000. The linked savings reduce estimated monthly interest by about £112.50.

  1. Find the interest balance

    Offset savings reduce the balance used for interest, while the mortgage balance itself is still £260,000.

    \[£260{,}000 - £30{,}000 = £230{,}000\]

  2. Calculate interest without offset savings

    Estimate one month of interest on the full mortgage balance.

    \[£260{,}000 \times 4.5\% / 12 = £975.00\]

  3. Calculate interest with offset savings

    Estimate one month of interest on the reduced interest balance.

    \[£230{,}000 \times 4.5\% / 12 = £862.50\]

  4. Compare the two interest estimates

    The difference is the estimated monthly interest reduction from the linked savings.

    \[£975.00 - £862.50 = £112.50\]

Related questions

Overpayment interest effectIntermediate - OverpaymentsRemortgage break-evenAdvanced - Remortgaging