UKs biggest lender ends IO mortgages without evidence.

JonnyBravo

DervProf wrote: »

That is the part I do not agree with, and why we are here now. It is precisely what I mentioned in my first response. It is not me who is changing the goalposts. I am using example to prove that statment to be incorrect. The only way that statement would be correct is if RM made precisely calculated overpayments at precisely the right times during his mortgage.

No, you're including the repayment part of the mortgage. Which he states needs to be "stripped out" for equal comparison.

You seem to be determined to underline "If you pay back more you will owe less" shocking revelations. That wasn't ever in doubt was it?

DervProf

JonnyBravo wrote: »

Exactly same as me. Well, no, not quite. We are still officially on IO, but I've worked out what a repayment mortgage is and make "monthly overpayments". Not sure it helps this discussion though.

(It's for our rental property but secured on our house.... I'm sure this definitely won't help and might get a few others angry about my selfishness too!)

We'll save that for another time/day

Come on now, let's get this sorted. I have Java study to do (maybe that is causing me to adopt a very precise and analytical nature on this forum !).

JonnyBravo

lol.
Hang on I think I'm with you.
You now seem to be arguing small differences in the timing of payments will mean small differences in amounts owing. Yes, I think, no, I'm sure, we can all see this.
This is somewhat different to the £10k difference in your example which was achieved by paying £10k more.

DervProf

JonnyBravo wrote: »

lol.
Hang on I think I'm with you.
You now seem to be arguing small differences in the timing of payments will mean small differences in amounts owing. Yes, I think, no, I'm sure, we can all see this.
This is somewhat different to the £10k difference in your example which was achieved by paying £10k more.

Thank you.

I think we are making progress. We might want to discuss my example, and I might be shown that it isn't a very good or apt one. However, as I keep pointing out, I am trying to stick to my original "challenge" to RM about his original statement. I have tried to use generic figures and his "actual" situation to explain why I thought he was wrong. And I still think he is wrong. He has denied it, but has not yet shown me (using his own "real" figures) any evidence to backup his claim.

DervProf

DervProf wrote: »

Thank you.

I think we are making progress. We might want to discuss my example, and I might be shown that it isn't a very good or apt one. However, as I keep pointing out, I am trying to stick to my original "challenge" to RM about his original statement. I have tried to use generic figures and his "actual" situation to explain why I thought he was wrong. And I still think he is wrong. He has denied it, but has not yet shown me (using his own "real" figures) any evidence to backup his claim.

And back to RM's claim (which is what this is all about) that interest rates won't make any diffrenece to the cost of the interest paid back on his mortgage, IO or repayment. I reckon chnages (lower or higher) to IR will make quite a lot of difference to the cost of the interest he will pay back. It all depends on how much he overpays on his IO mortgage. If rates suddenly went to 10% and he made a £200K overpayment, then there is no doubt that the effect of the rate rise would be quite small, and the overall cost of his mortgage would be much smaller (compared to a repayment mortgage). As I said before, the only way that his statement is true, is if he carefully calculated his overpayments.

DervProf

DervProf wrote: »

And back to RM's claim (which is what this is all about) that interest rates won't make any diffrenece to the cost of the interest paid back on his mortgage, IO or repayment. I reckon chnages (lower or higher) to IR will make quite a lot of difference to the cost of the interest he will pay back. It all depends on how much he overpays on his IO mortgage. If rates suddenly went to 10% and he made a £200K overpayment, then there is no doubt that the effect of the rate rise would be quite small, and the overall cost of his mortgage would be much smaller (compared to a repayment mortgage). As I said before, the only way that his statement is true, is if he carefully calculated his overpayments.

And I am using the comparison with a repayment mortgage, if he were to have a simple repayment mortage, and made the same overpayment, the costs in interest would still be quite different.

DervProf

RenovationMan wrote: »

As you were the one who said I was "Wrong (again)", Surely the onus is on you to prove me wrong?

If you cant be bothered, then perhaps you should post a retraction?

I think I have provided enough evidence, by way of example, to prove you wrong. The way to prove this, right or wrong, is not to just say the other person is wrong, use some examples of calculations.

Tell you what, I might even write a Java program to do so. That'll be killing two birds with one stone.

JonnyBravo

DervProf wrote: »

Thank you.

I think we are making progress. We might want to discuss my example, and I might be shown that it isn't a very good or apt one. However, as I keep pointing out, I am trying to stick to my original "challenge" to RM about his original statement. I have tried to use generic figures and his "actual" situation to explain why I thought he was wrong. And I still think he is wrong. He has denied it, but has not yet shown me (using his own "real" figures) any evidence to backup his claim.

He's not wrong though. You are.
You keep including elements of repayment in your arguments to prove him wrong. He specifically excluded them.

You could of course have pointed out that if one did exclude them then one is simply comparing an IO mortgage with an IO mortgage. But I think that's the point he was making.
An IO+overpayments = a repayment
You're saying they're not equal by not allowing the overpayments at the same time. Seems silly. Forcing something to be unequal and proclaiming.... "look how unequal these are!!"

DervProf

OK let's move the goalposts a bit (to help in what we are discussing).

2% IR, £300K mortgage.

Let's start without any overpayments.

How much interest will be paid back on the IO mortgage ?

How much interest will be paid back on the repayment mortgage ?

If IRs increase, how will it affect the amount of interest paid back on each mortgage ? Will the increase be the same for each mortgage, or will it be the same amount ?

DervProf

RenovationMan wrote: »

What are you trying to prove here? My mortgage isnt £300k nor at a IR of 2%. How will something totally unrelated to what I said, disprove what I said?

I have not moved the discussion onto quantum physics, it is still about mortgages. Could be your mortgage, or someone else's mortgage, but it is an attempt to illustrate that your statement -

"I would say that it makes no real difference whether I have an interest only mortgage or repayment one when rates start to rise. Strip out the repayment part of the mortgage and both will cost the same amount."

is inaccurate (and by quite a long way).