A pie in the sky thought

andthatmakesone

Just wondered if anyone else feels the same as I do. Plus I just fancied having a rant...

Given the recent shift that all the credit card companies are having to take - that of paying the most expensive debt off first - I started thinking about how mortgage providers structure your payments between capital and interest.

All providers I know of always lump the interest towards the earlier payments, resulting in a remarkably slow reduction of the capital element of mortgages in the earlier years.

This of course has a severe knock on effect when considering changing your mortgage provider - given that (for example) 5 years into a 25 year mortgage, you won't have 20/25ths of your capital outstanding. Meaning you can't simply shift to a new 20 year mortgage and expect to be significantly better off for the new deal. You may still be better off, but not as much as you should (I believe) expect to be.

Am I alone in thinking that this is something to be addressed?

Is there a mortgage provider out there that structures the interest payments equally over the term?

Is this an area that Martin can have a look at?

Annisele

I don't agree at all. Why would you expect to have 20/25ths of your capital outstanding 5 years into a 25 year loan? That would only be the case if the interest rate was 0%.

If you want the capital repayments structured evenly over the term, you're going to have a mortgage that's very expensive during the first few years, and much cheaper over the later years.

If you want the interest structured evenly over the term, you're still going to have an expensive mortgage - the only way I can think of doing that is to have an interest only mortgage with a separate repayment vehicle.

[Deleted User]

As Annisele says above.

On a 200k mortgage, it would be the equivalent of you voluntarily overpaying £8k in your first year alone. That's in addition to your monthly mortgage payments. How many people do that? Certainly very few at the beginning of a 25 year term.

MegaMiniMouse

Let me try to explain

At the beginning of your mortgage, you owe a very large amount of money to your lender, and so your monthly interest will be correspondingly high

As a result, most of your early monthly repayments will go towards paying off your monthly interest, and only a tiny amount will go towards paying off the capital

Gradually, the tiny amounts of capital repayment will accumulate, so that after a few years, you will begin to pay less in interest, and the reduction in interest will translate into greater monthly capital repayments

As time goes by, the speed with which you pay off the capital will increase, because the interest part of your monthly payment becomes smaller and smaller

Eventually, your capital loan will be fully repaid, and therefore there will be no interest payable

Yippee - you will finally own your own home

If at any time you choose to pay off your mortgage in order to take out a fresh one on a different property, then your first lender will require you to repay the outstanding capital on the original mortgage, and your new lender will lend you a similar amount - you will be no more in debt, except that if your new property costs more than the previous one sold for, then you will have borrowed more and your repayments will therefore be higher

MMM