Mortgage vs Personal Loan Calculator

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 years, personal loan rate of 9%, and personal loan term of 5 years), the result is 3,558.54.

Which inputs matter most

Term length does most of the work in this comparison, but rate can flip it. At the defaults, the personal loan stops being cheaper once its rate passes roughly 14.87%, and doubling its rate to 18% hands the win to the mortgage route outright. The term crossover sits near 8.3 years: a 9% personal loan over 8 years still beats the 15-year top-up on total interest, while 9 years tips it the other way. Amount scales both totals proportionally, so the winner never changes with amount alone.

What's happening under the hood

Standard amortisation runs for each route: the monthly payment is fixed from the amount, monthly rate, and number of months, total repayment is that payment times the months, and interest is the total minus the amount borrowed. The two interest totals are then subtracted to give the headline 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

Interest accrues each month on the balance still outstanding. A five-year loan repays principal quickly, so the average balance carrying interest over its life is small. A fifteen-year top-up keeps a slowly declining balance alive for a hundred and eighty months, and those extra years of accrual outweigh the four-point rate advantage at the defaults. Term does more work than rate until the rate gap grows very large.

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 setup and valuation fees on additional borrowing against an existing mortgage, any prepayment penalty or 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.