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UKs biggest lender ends IO mortgages without evidence.
Comments
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RenovationMan wrote: »
I started the mortgage in May and paid the overpayment in June. You are correct that I would not have paid such a high capital repayment as a one-off if I was already making capital repayments monthly.
Sorry to be thick, but why not just start the mortgage £30k lower, if you were going to re-pay 10% within weeks?...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
RM, I take it that once an OP is made, the monthly repayment is recalculated by your lender, and you then pay the adjusted (lower) monthly payment.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0
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neverdespairgirl wrote: »RenovationMan wrote: »
Sorry to be thick, but why not just start the mortgage £30k lower, if you were going to re-pay 10% within weeks?
I think RM's mortgage has restrictions on how much he can overpay, I`m not sure about the timing, I think he can only pay upto 10% per annum, but pay at any time, or any number of times. I think he plans to pay off 10% of the outstanding balance, once a year in June.
Enough of this for now, I need to go.
Actually, thinking about this in a less detailed way. If you can pay 10% of your mortgage off per year, you can either pay it on a certain date, or split what you overpay into monthly payments. Surely monthly payments are a better option (as long as you lender calculates interest daily - I know mine does).30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
RenovationMan wrote: »My mortgage will then be compete and I will see hwo things lie with the economy and make my next mortgage decisions accordingly.
Do you mean that your mortgage product will come to the end of its term? Worth reading the small print to see what interest rate you default onto.0 -
£300K, 20 year mortgage, we are looking at the first 3 years.
IO
Monthly interest 1 month @ £638, then a 27K op, 11 months @ £579
End of year 1, outstanding capital = £272362 then 27k op, 12 months @ £520
End of year 2, outstanding capital = £244665 then £24.3K op, 12 months @ £467
End of year 3, outstanding capital = £219,791. Interest paid = £18851.
Repayment.
Monthly payment (inc capital, of course) for month 1 = £1597, then a 27K - £959 op (£959 was used in month 1 as repayment, rather than the £638 it would have been on IO) 1st op = £26041.
End of year 1, outstanding capital is £261694, 2nd op is £16451 (27K - the extra money spent to make the repayments @ 1597 per month (12 x £959))
End of year 2, outstanding capital is £233973, 3rd op is is £12792 (24.3K - the extra money spent to make repayments @ 1597 per month (12 x £959))
End of year 3, outstanding capital is £210474. Interest paid must be less than if the same payments had been made, as the outstanding capital is now ~ £9K lower, yet RM will have payed out the same amount from his own money into the mortgage.
I think my sums are correct.
I am a little suprised that there is such a "saving" to be made by paying the same amount in, but comparing an IO to a repayment.
If you do the same sums with a higher interest rate, the difference would be larger (I think).
Hang on a second !
It isn't 12 x 959 in the second and third years. It's more than that, as he would have had lower IO payments in those years (due to the reduced capital owing after the repayments)
Derv, you've been posting pretty much non-stop since Sunday morning, only pausing to get some sleep it seems, and now you've just spent god knows how long working this lot out.
I mean this nicely, take a break. There's no reason to care this much.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
RenovationMan wrote: »I shouldn't worry. I dont think anyone, including me, actually cares about all this and I'm certainly not in the business of following people around a forum declaring that that are "Wrong (again)". I leave that to the sort of people who probably have so few successes in life that they need to boast about their small internet forum 'wins'.
However, if you want to get your calculations right please use the following mortgage & overpayment information:
May 2010 - Mortgage starts at £300k.
Jun 2010 - OP of £30,000 made, reducing mortgage to £270,000
Jun 2011 - OP of £27,000 will be made, reducing mortgage to £243000
Jun 2012 - OP of £24,300 will be made, reducing mortgage to £218700.
Jun 2013 - Mortgage deal ends and I remortgage. The house will be revalued and I will get to find out if I have hit my 50% equity challenge.
Your version had the inital OP as £27k and you also had the £24300 on the last day of the mortgage, but its actually 1 year before the end of the mortgage.
Cheers.
Instead of using online mortgage calculators, I think I`m going to write my own code to work out the figures. It's this kind of "problem" that helps me with my programming skills. It should be fairly easy to put together some code to "crunch" the numbers. I dare say that it might be possible to use a spreadsheet, but it should be fairly easy for me to put some Java code together to work out the figures.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
I didn't think my original post would create such a debate.
Anyway the point I was originally trying to make was more of an issue of affordability for RennovationMan.
What I was getting at was that if interest rates rose to say 4-5 % would RennovationMan still be able to continue to heavily overpay his interest only mortgage?
Because if not then he is not paying any capital off his mortgage any longer THEREFORE the debt will not be getting any smaller over time.
The question I am asking is...... would RennovationMan be able to continue to make capital repayments on this mortgage if interest rates rose significantly?0 -
shortchanged wrote: »The question I am asking is...... would RennovationMan be able to continue to make capital repayments on this mortgage if interest rates rose significantly?
Yes we're all asking the same thing. After all this is the 'debate house prices and Renovation Man's mortgage' board.0 -
shortchanged wrote: »The question I am asking is...... would RennovationMan be able to continue to make capital repayments on this mortgage if interest rates rose significantly?
Why not have a poll to settle the matter for now.
No doubt the topic will rear its head in the future when base rate normalises in the 3.5% - 5% range.0 -
RenovationMan wrote: »lol, nice one wotsthat and thrugelmir.
Shortchanged, I asnwered your question here: http://forums.moneysavingexpert.com/showpost.php?p=42935492&postcount=156
You probably missed it in the collateral damage from 'Mortgage Gate'.
Cheers, I must of missed that one whilst skimming through. 0
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