what will my rate be??

smnb08

i currently have a fixed rate of 8.88% with beacon/redstone.
was curious about what will happen when the fixed rate finishes in november so have just been looking at my key facts.
it says when the fixed rate term runs out it will be...
"a variable rate being libor rate,currently 5.8%,plus a margin of 3.25% giving a current rate payable of 9.05.
pardon me for being thick but does that mean i will be paying the libor rate plus + 3.25%??
it will be a big drop in my repayments but im so sure it will not happen that way!

smnb08

also do you pay the rate on what you borrowed in the first place or what you owe now??
i borrowed £94,000 on a 30 year mortgage.
i just checked my mortgage balance on experian and it says £93,399 how can that be when ive paid about 16 payments?

wodgerdodger

I hope for you that it does go to the current Libor 3 month rate which is 0.61625 plus the premium.
The reason why your debt has not reduced that much is that being a repayment mortgage the payments you make in the early years are predominantly made up of the interest element and very little capital. As time progresses, and by this I mean quite a few years, that relationship changes so that more capital than interest is being repaid from each monthly payment.
It might be an idea to contact your original broker who arranged the loan for you to answer the query on whether the new calculation is on the original amount or the reduced one. Theres no help on beacons own website.
Most Lenders would calculate the new payments on the current outstanding balance but unfortunately in this world you can never assume anything.

ViolaLass

wodgerdodger wrote: »

It might be an idea to contact your original broker who arranged the loan for you to answer the query on whether the new calculation is on the original amount or the reduced one. Theres no help on beacons own website.
Most Lenders would calculate the new payments on the current outstanding balance but unfortunately in this world you can never assume anything.

I should imagine that's /all/ lenders as they can hardly charge you interest on money you've already paid off!

wodgerdodger

I totally agree I don't know of a Lender who would charge on anything but the outstanding debt but specialist sub prime lenders of which beacon are may have some different ideas to the mainstream so my suggestion was purely to ask the question.....it's surely better to ask than just assume . Ignorance can cost money and is never a defence!

Gorgeous_George

smnb08 wrote: »

also do you pay the rate on what you borrowed in the first place or what you owe now??
i borrowed £94,000 on a 30 year mortgage.
i just checked my mortgage balance on experian and it say/s £93,399 how can that be when ive paid about 16 payments?

Borrow £94,000 at 8.88% over 30 years gives an initial repayment of £748.24.

After 11 months you should owe £93,339. Is that how long you have had the mortgage? Or maybe that is when experian was updated

Take £93,339 over 29 years and a month and your repayment will collapse to £446.09 at 3.86625% (assuming LIBOR = 0.66125%).

That is a fall of 40% in repayments. Keep paying the original amount of £748.254 and you could slash the mortgage term by more than half (assuming LIBOR stays the same of course).

GG

smnb08

Gorgeous_George wrote: »

Borrow £94,000 at 8.88% over 30 years gives an initial repayment of £748.24.

After 11 months you should owe £93,339. Is that how long you have had the mortgage? Or maybe that is when experian was updated

Take £93,339 over 29 years and a month and your repayment will collapse to £446.09 at 3.86625% (assuming LIBOR = 0.66125%).

That is a fall of 40% in repayments. Keep paying the original amount of £748.254 and you could slash the mortgage term by more than half (assuming LIBOR stays the same of course).

GG

so when my rate drops in november if i kept the payments the same(if im allowed)how much would i owe in two years time say november 2012.

Gorgeous_George

After 2 years at 8.88% you will owe £92,623.

Continue paying £748.24 for a further 2 years and you will owe £88,805 if you change your payment to £451.69.

Keep your payment at £748.24 for years 3 and 4 and you will owe £81,418 at the end of year 4.

GG