Repayment mortgage and capital payments

bundance

I have a question please.

I am on a fixed rate mortgage of 5.18% until 2016.

I have had the mortgage since December 2000.
It was £52150
I now owe £41156.36
So, I have been paying off just over £1000 per year
I understand, that after a certain time, (ten years?) I start to pay captial off.
I understand that the amount owed begins to drop at a faster rate, and I would like to know how fast?

thank you for your help

yelf

No - you are paying off capital and interest with every payment. To begin with the bulk of the payment is interest with a small bit of capital, but as you eat away at the capital the interest becomes less: therefore as time goes by your monthly payment pays off more and more capital.

Joe_Bloggs

@bundance
Based upon your figures the capital owed is increased through interest by £173.50 per month. The amount you pay per month goes towards cancelling out the interest and eating away at the capital. Thus you can work out for yourself , given by how much you pay, the decrease in capital owed each month.

If you pay £450 then the capital will reduce by 450 - 173.50 = £267.50.
This makes a minor dent on £41156 to make it £40880.50. Multiplying this figure by the monthy interest rate for the annual 5.18% (ie 0.422%) gives the approximate interest of £172.50 for the next month. Thus the interest has gone down by £1 in a month hence the capital repayment would have gone up by £1 if the monthly repayment remained at £450.

You did not mention your repayment per month nor state the full term of the mortgage. Many lenders calculate interest daily rather than monthy. It does not make much of a difference Some lenders have quirks on how they calculate interest and how they allocate repayments/overpayments.
J_B.

bundance

I pay 311.20 per month, the fixed term is till 2016.
The mortgage itself runs until 2025
Sorry to sound thick but I don't really understand the above.
My main question, in laymens terms, was will the amount owed start reducing faster?
Sorry for the extra questions.

thank you

Joe_Bloggs

Each month you pay £311.20. In between payments the capital increases due to monthly interest charged on the capital. You repayment covers this interest and eats in to the capital. if £172.50 is interest then the rest must be off the capital. Thus the repayment consists of

Capital.. Interest.. Capital repayment
£41156 £173.50 £138.70

Each month the capital decreases by the capital repayment part so then next months interest is less and the capital repayment is more.

Capital.. Interest.. Capital repayment
£40117.7 £173.10 £138.10

At the present time the capital repayment increases by 40p each month.
I reckon by June 2012 interest and capital repayment will be equal.
By repaying £50 a month extra you could knock just over three years of the mortgage
J_B.

bundance

Greatly appreciated thank you for your insightful help.