Mortgage vs Personal Loan Calculator
Cheaper way to fund a large expense.
Compare cost of funding via mortgage top-up vs personal loan for the same amount. Enter amount needed and mortgage rate to see total interest of each.
What this tool does
This calculator models the total interest cost of funding a large expense through either a mortgage or personal loan. It compares two borrowing routes by calculating the full interest payable under each option, given your loan amount, the rates available to you, and the repayment terms. The result shows how much more or less interest you'd pay by choosing one path over the other. Mortgage rates typically sit lower than personal loan rates, but the mortgage term often extends longer. Personal loans charge higher rates but compress repayment into fewer years. The interest difference—driven mainly by the rate gap and term length—illustrates the trade-off between lower monthly payments and total interest paid. This calculation assumes standard amortisation and fixed rates; it does not account for fees, insurance, early repayment penalties, or changes in circumstances.
Quick answer: with the default values, the result is $3,558.54 (Personal Loan Saves Interest). Adjust the values below for your own figures.
Enter Values
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Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
A 20,000 mortgage top-up at 5% over 15 years runs to about 8,470 in interest, while the same 20,000 as a 9% personal loan over 5 years costs about 4,910 — roughly 3,560 less, even though the personal loan's rate is higher, because its shorter term means far fewer months of interest. The trade-off: the mortgage top-up has the lower monthly payment but the higher total cost.
Quick example
With amount needed of 20,000 and mortgage rate of 5% (plus mortgage remaining term of 15 and personal loan rate of 9%), the result is 3,558.54.
Which inputs matter most
You enter Amount Needed, Mortgage Rate, Mortgage Remaining Term, Personal Loan Rate, and Personal Loan Term.
What's happening under the hood
Standard amortisation for each path. Subtract to find interest difference.
What the headline rate hides
Lenders quote a rate; what you pay is a blend of that rate, fees, insurance, and any early-repayment penalty built into the product. The figure here isolates the core interest cost so you can compare like-for-like across deals; fees, insurance, and other costs sit on top of that base.
Why the higher rate can cost less
Borrowing the same amount over different terms produces the counter-intuitive result the calculator exists to show. At the defaults, 20,000 added to a mortgage at 5% over fifteen remaining years costs about 8,500 in interest, while a personal loan at 9% over five years costs about 4,900, so the higher rate is the cheaper option by roughly 3,600. Term does more work than rate.
What the comparison excludes
The comparison assumes the mortgage addition runs for the full remaining term, which is what makes it expensive; overpaying to clear it sooner changes the picture substantially. It also excludes arrangement and valuation fees on further advances, any early repayment charge, and the difference in security, since the mortgage route places the borrowing against the property while the personal loan does not. Monthly affordability differs sharply between the two even where total interest favours the shorter term.
Borrowing £20,000 at 5% mortgage versus 9% personal loan rates produces a total interest difference of about $3,558.54 between the two routes.
Inputs
| Mortgage Interest | $8,468.57 |
|---|---|
| Personal Loan Interest | $4,910.03 |
| Mortgage Monthly | $158.16 |
| Personal Monthly | $415.17 |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator computes the total interest payable under each borrowing option using standard amortisation principles. For both the mortgage and personal loan, it calculates the monthly payment amount based on the loan amount, interest rate, and term length. It then multiplies the monthly payment by the total number of months to determine total repayment, and subtracts the original loan amount to isolate interest paid. The difference between the two interest totals shows the relative cost of each option. The model assumes a fixed interest rate throughout the full term, regular monthly payments, and no early repayment, fees, or changes to circumstances. It does not account for variations in actual rates, payment holidays, or differences in tax treatment between borrowing types.
Frequently Asked Questions
Why does mortgage cost more total?
Why does mortgage have lower monthly?
Risk of mortgage top-up?
Best use case for mortgage top-up?
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