The Interest has decreased but the Capital Repayment has increased, why??

getmore4less

One of the easiest way to demonstate the effect is to start with an interest rate of 0% and work up.

caracal_77

rjar, look at the link below. You can change the interest rate tab to see the difference. Helps visualize things.

http://www.drcalculator.com/mortgage/

Robert_Sterling_3

lukekelly wrote: »

How many people do you need in a room to have at least a 50% probability that at least two people share a birthday?

Yes I like this one too.

As you will know in a class of 30 pupils it is more likely than not that two pupils will have the same birthday.

We checked all 60 class registers in a large comprehensive school ( pre computer era ) and this confirmed our prediction.

Of course it would be like for a slightly smaller class too.

rjar20rjar

http://www.drcalculator.com/mortgage/ is a great link, I wish I had seen that at the start of all this, however before that I had used a spreadsheet based on my payments and what was throwing me was the fact that my capital repayments were increasing by so much so quickly (10% month on month). The answer to the puzzle really lay in the mortgage schedule http://www.shiredirect.com/mortgages/mortgage-calculator/mortgage-repayment-schedule-calculator.php, the spreadsheet function http://www.hughchou.org/calc/ss.html and the manual explanation http://www.hughchou.org/calc/formula.html.

lukekelly_2

It is a linear equation

You keep saying this and, as people have said again and again, it is entirely wrong. You can't keep asking for the equation (and thus admitting that you don't understand the mathematics of it) and asserting that it is linear to people who do actually understand how the mathematics works.

Here's a formula if that would make you happier:



P is the principle sum owed, A is the periodic payment, r is the periodic interest and n is the number of periods of repayment. You can use it via google calculator.

As you can see this is not linear. It's not even polynomial.

NewSu

Question: How come the value of my repayment has decreased by £29.33 year on year?

C&G mortgage, initiated 2006 @ £126k with £110k on repayment & £15k on interest only with first 2 years on fixed rate & now on discounted variable rate.

Capital repaid:
2006 - £3246 (~2.58% of original borrowed sum),
2007 - £3643 (~2.97% of capital remaining as at Dec 2006 & increased repayment of £397 year on year),
2008 - £3614 (~3.03% of remaining capital as at Dec 2007 & DECREASED repayment of £29 year on year). C&G seem unable to explain this & I have been trying to get an answer for nearly a month. Any thoughts or advice would be appreciated

Sorry to interrupt but never posted anything before anywhere so no idea if this is right ... also I am definitely not a math graduate so my percentages may not be exactly, completely right or they maybe plain wrong!

dunstonh

I havent got time to check your figure but C&G operate an annual review on a lot of their mortgages. Does your change once a year or every time there is a rate change?

NewSu

thank you for your reply.

2007 - fixed rate 2008 onwards - discounted variable so every time the rate changes so 5 changes during this year.
I've also had a reply from C&G who tell me that this was primarily due to interest rate changes & to the fact that it was a leap year.
Surely if the amount the interest rate changes that shouldn't affect the amount repaid proportionally as they then put my payments up?