MoneySavingExpert Chair, Martin Lewis · Editor, Marcus Herbert

# Determining ratio of interest vs capital in a monthly payment

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Forumite
26 Posts
Forumite
Can someone explain why BS and banks seem to structure mortgages so you eventually are paying capital only. I can understand it if you are on a fixed deal and are tied
to your lender. Other than that specific case, my simple take on the
situation is that a larger debt equates to higher interest being earned. Thus, never paying some interest is impossible until you have zero debt.

Along the same lines, how do lenders decide the ratio of capital vs interest to be paid each month? Is it merely a calculation based on mortgage duration, affordability, interest rate etc?

I am with C&G at present and flippng on to the SVR next year - let's hope it goes down another 2.5% :rotfl:

Thanks to all.
Initial Mortgage February 2005 - £275,010.00 :eek:
Current Mortgage November 2011 - £228,313
2011 £25,410 OP target - £6,359.00 to go..
Regular Savings Account (8% APR) - [STRIKE]£2400[/STRIKE] £2700

## Replies

• Forumite
236 Posts
Forumite
Sorry if I am misunderstanding, but in what scenario are you "eventually paying capital only". If you have capital outstanding, then you will be charged interest on it.

Ref the ratio of capital versus interest, thinking it through it would just be a calculation using mortage duration and interest rate - hence interest rate rises/falls, and your min payments change (if not on a fixed rate).
Opening Mortgage balance as of 01.10.21 - £438,500.00 Current Mortgage balance as of 01.02.23 - £426,216.53
• Forumite
26 Posts
Forumite
I asked C&G how they determined how much capital vs interest to pay from a clients monthly inpayment and I couldn't get an answer.

You're right though, a simple algorithm must be at the heart of it which ultimately relates duration of mortgage to how the money is distributed. I often had heard the phrase " but anyway, all you pay for the first first 5-10 years of a mortgage is interest". In hindsight, this was a little bit of poetic license with a dash of unhealthy cynicism. It didn't stop me hopping around mortgage providers a few times in my earlier years - but now I wonder was this a false saving ultimately :mad:
Initial Mortgage February 2005 - £275,010.00 :eek:
Current Mortgage November 2011 - £228,313
2011 £25,410 OP target - £6,359.00 to go..
Regular Savings Account (8% APR) - [STRIKE]£2400[/STRIKE] £2700
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