have I made a stupid mistake

bundance

I took out a captial repayment mortgage in 2000 due to finish in 2025

In 2006 I took out a fixed repayment deal of 5.18% for 10 years, until 2016 which I am tied into until that time.

My question is regarding the fact that after about ten years or so, more of the capital starts to be repaid.
I am concerned that I will paying excessively until 2016, whereas if I had got a deal for less than ten years, my payments would have started going down as soon as 2010-ish.
They might have gone down substantially, so had I not have taken out the 10 year fixed deal, I may have been paying less per month, due to the capital starting to decrease.
This is where I think I have been a fool.

Please advise if my taking out a ten year fixed deal has caused me to be ripped off or have I made a silly mistake?

thank you

Mrs_Bumble

Why do you think you have been ripped off or made a silly mistake?

If you had no intentions of moving in that 10 year period then not chopping and changing your mortgage deals during that time has saved you administration and arrangement fees, legal fees, valuation fees etc. At points in the 10 years you might have obtained an interest rate lower than the one you have and at times you might even have had higher. So all in all I think that if you intended not to move in the 10 year period then what you have done has probably saved you money over the term of the product.

Can you overpay on this product?

andrewmp

bundance wrote: »

I took out a captial repayment mortgage in 2000 due to finish in 2025

In 2006 I took out a fixed repayment deal of 5.18% for 10 years, until 2016 which I am tied into until that time.

My question is regarding the fact that after about ten years or so, more of the capital starts to be repaid.
I am concerned that I will paying excessively until 2016, whereas if I had got a deal for less than ten years, my payments would have started going down as soon as 2010-ish.
They might have gone down substantially, so had I not have taken out the 10 year fixed deal, I may have been paying less per month, due to the capital starting to decrease.
This is where I think I have been a fool.

Please advise if my taking out a ten year fixed deal has caused me to be ripped off or have I made a silly mistake?

thank you

You misunderstand the way mortgage capital repayments are made. Don't worry about it.

bundance

Mra bumble


I think I have made a silly mistake because, if I had not tied myself in until 2016, my monthly payments would have been substantially less, due to me starting to pay off the capital around the ten year mark.
As it is, I am paying a set cost until 2016, so I wont notice a reduction in payments until then.
I said I may have been ripped off due to paying more interest than I may have had to pay.


Andrewmp

I didnt misunderstand the way mortgage captial repayments are being made, I just took out the ten year deal for security reasons as interest rates seemed low then, and I didnt bargain for them dramatically decreasing in the years after 2006.
I am kicking myself because I even asked the mortgage broker about this at the time, but did not get a definitive answer, and felt too embarrassed/stupid to ask more questions.

Am I paying excessive interest that I neednt have been paying please?


thank you

TroJon

Erm, yes you have actually misunderstood how the repayment mortgage is working, that's why you think "oh after 10 years I pay back more capital" etc.

With regards to your whole point, what is your loan to value. If you really want to compare current market rates you may as well let us know, to see if you're in a good deal or not for the current market.

At the end of the day, a 10 year deal gives you massive security in KNOWING what your payments will be, plus you will rise out the highs and lows of the market fluctuations. Not a bad deal if you don't plan on moving imo.

Mrs_Bumble

I think maybe you have misunderstood the way the capital repayments are made.

Your interest rate is an average interest rate, it isn't significantly high and to be honest the only way you would have significantly benefit is if you happened to have a 0.18 above base rate tracker but your budget at the time may not have coped if interest rates had increased significantly, as it would have been impossible to predict the banks crashing as they did.

You are still making repayments off of your mortgage and will probably notice them a little bit more around the ten year mark.

I asked you previously if you had any intentions of moving in the ten year period? as the costs of swapping your deals every 2-3 years in the meantime would have cost you significantly adding costs to your mortgage everytime, in admin/arrangement fees/legal fees/broker fees/valuation fees etc, by not doing this during the 10 year period you will have saved yourself thousands!

Are you able to make overpayments on your mortgage?

Overpaying is a key way to cut down the costs of your mortgage and every little helps

http://www.whatmortgage.co.uk/calculators/fleximortgage.html

If you weren't intending to move in the 10 year period then I think that the interest rate you have is fine, particuarly if you needed the security of knowing what the monthly payments were going to be each month and not shopping around in the meantime just for the sake of it will have been a very sensible thing to do.

Wutang_2

bundance wrote: »

...I didnt bargain for them dramatically decreasing in the years after 2006.
I am kicking myself because I even asked the mortgage broker about this at the time, but did not get a definitive answer, and felt too embarrassed/stupid to ask more questions.

I cannot believe your broker did not tell you the future of interest rates - I would complain to the FSA time-travelling team.

JimBoB_5

Wutang wrote: »

I cannot believe your broker did not tell you the future of interest rates - I would complain to the FSA time-travelling team.

I tried to complain to the FSA time-travelling team last week, but they saw me coming.

ylesia

Your payments would not decrease after 10 years unless you are part interest only?

Your monthly payment stays the same, it is the element that is paying of the capital that gradually increases each month as you reduce the capital outstanding, therefore reducing the monthly interest.

There is no sudden jump in the amount of your payment going towards capital after 10 years - unless you make overpayments.

bundance

Thank you for your answers.


Trojon

I didn't know what the 'loan to value' term meant, but my original mortgage back in 2000 was £52150 loan - value £55000

As for the LTV when I took out the latest mortgage in 2006 the loan was £45,320.04 and the value (no valuation done in 2006) was estimated at £117,812
(current value £101,000+) according to nationwide houseprice calculator.
I tried having a go on the "ditch my fix" calculator, but kept getting a negative interest amount but could not find the error.
Would this be sufficient information for you to let me know if I have a good deal or not?


Mrs Bumble

You are still making repayments off of your mortgage and will probably notice them a little bit more around the ten year mark.

I am still making interest payments mostly off my mortgage, but as I am on a fixed deal till 2016, I feared I would miss out on decreasing monthly payments after the ten year mark, due to the capital starting to be paid, whereas now its mostly interest, but *(see below) as per Ylesia's post below, I now understand this not to be the case.

Of course, the ten year fixed deal at 5.18% does offer security against fears of future rising interest rates, and keeps me from having to keep monitoring the base rate.

I have no current intentions of moving in the next ten years, and I am sorry I never answered your question.

My lender will not let me make overpayments on my mortgage under this deal.


Wutang

LOL, message of complaint beamed back through the wormhole.


Jimbob

They already have my complaint, 3 years before I made it


Ylesia

Your payments would not decrease after 10 years unless you are part interest only?

Your monthly payment stays the same, it is the element that is paying of the capital that gradually increases each month as you reduce the capital outstanding, therefore reducing the monthly interest.

There is no sudden jump in the amount of your payment going towards capital after 10 years - unless you make overpayments.

*(see above) Ah, so I did get confused, I was under the impression that repayment mortgages monthly payments started to decrease, once you started paying off the capital.

Thank you all, comments more than welcome, in case I am still confused. I love my home but not so much my mortgage, but I guess that's the same with everyone.

Mrs_Bumble

No overpayments whatsoever? Have you checked the offer? Who is the lender?

So if you had no intention of moving in the 10 years then being on the same fixed rate has saved you the fees each time you would have looked to remortgage. Like I said previously you would only have benefitted if you had gone onto a tracker at a very low percent above bank of england base rate and at the time you remortgaged you were looking for security of knowing what your monthly payments were and you have that.