Will sell flat after 3 years - will i get interest back for payments already made?

pre-reg

hi people need your help...

I brought a flat with 154k mortgage in sept 2004. I will be returning back to study in october 2007 so will be selling the flat. Now assuming the flat hasnt gone up in value (it hasnt as far as i can tell!), i was wondering if i will get any money back from my mortgage that i have already paid.

here are the details:

Mortgage: HSBC graduate home start mortgage. £154k over 25 years.

Interest only for three years then repayment. £743 i have been paying and will pay until i sell the flat in august 2007 (lets say i have had the mortgage for 3 years then). So total mortgage paid = £743*36months = £26 748.

The interst rate is 5.79% fixed till august 2007.

Now i am not sure now to work out how much interest i should have paid in the 3 years that i would have had the mortgage/flat.

I think as i will be selling the flat and i would have paid all that interest based on a 25 year mortgage i should be getting some money back??

Hope all the above makes sense and look forward to your help.

many thanks

nearlyrich

If the mortgage is interest only for the first three years and you are selling at around the 3 year mark ( I think) you have not paid anything off the capital so you will still owe the HSBC the amount you borrowed. I think it is unlikely that your flat has not increased in value at all unless you paid too much for it or it is in an area where prices are falling.

ManAtHome

You haven't paid any extra interest. Nothing magic about mortgages, just a loan secured on property. Basically, you're borrowing a wodge of cash and paying the bank interest on the amount outstanding.

As you borrowed £154k at 5.79%, the annual interest will be £8,916 (£743 per month). With it being interest-only, you still owe the bank the £154k you borrowed - theory is that you sell up and give the bank their money back then you can stop paying interest.

With a repayment mortgage, you still pay the £743 interest but also a few quid extra which is taken off the amount you borrowed. As this goes down, the amount of interest you need to pay also goes down. The extra is calculated to clear the sum borrowed after 25 years.

pre-reg

thanks for the replies....but i thought the interest that would have been calculated would have been as if i had had the money for 25 years...but as i would have had the money for 3 years then i would have overpaid on the amount of interest, so i would get the excess back.

I went on the online mortgage calculators and put in 154k borrowed over 3 years at 5.79% and the total interest amount for the loan comes to about £14k.

So i have paid £26 748 so far so would i not get back 26k-14k?

Am i making a mistake somewhere? many thanks

ManAtHome

Was the calculation for a repayment mortgage - monthly payment over £4.5k? With this, you'd be covering the interest plus repaying around £4 of capital each month, goes something like... month 1 you owe £154k so they charge you £743 interest. You actually pay (say) £4,743 - month 2 you now owe £150 - interest on this is £724, so this month your £4,743 reduces the sum you owe by £4,019.

Only chipping small amounts off at the start, but over time the amount of interest you have to pay reduces significantly. This is why we're not normally keen on interest-only mortgages - you'd pay your £743 a month for 25 years and still have to find the £154k you owe the bank at the end of it.

pre-reg

thanks i have realised i must have done the calculation for repayment morgages....damn...i am hoping that by the time i sell the flat has gone up otherwise i have made nothing!! Thanks once again.

MyUserNamesTaken

pre-reg wrote:

hi people need your help...

I brought a flat...

Bring it back!

Schamansky

This post isn't going to be useful or helpful...

...but I hope you're not going to study economics or business!!

Already apologizing.

pre-reg

Schamansky wrote:

This post isn't going to be useful or helpful...

...but I hope you're not going to study economics or business!!

Already apologizing.

ha ha :-) medicine actually, although i didnt have any plans at the time i brought the flat! how life changes it course!!

tomstickland

Why do you keep bringing the flat into things?

ManAtHome

Yes, but if you hadn't bought it, you'd have had to pay rent anyway - should soften the blow.

Anyway, less of the slagging peeps - one day you may be turning up for a vasectomy...