Is this right? I'm only paying £186 off my actual mortgage?

Greenwellies_2

I've just gone from an interest only mortgage deal (for the past 3 years) to a repayment mortgage (I think that's what it's called)

On a mortgage of 107K, I've paid £731 this month, and the interest was £545.
So I've only paid £186 off my house.
Is that right?

if so, £186 x 12(months) x 22 (years) = £49.1K

So I'll never pay it off ????

I'm very, very concerned.

Can someone explain this to me if I've got it wrong

Thanks

GW

1jim

I dont know about the figures but on a standard repayment mortgage in the early years most of the repayment is in interest with a small amt paying off the capital, as the capital sum reduces the interest reduces and you pay more capital
not sure if I expalined that well ....
in early years most of mthly payment is interest and small amt capital
in later tears most of payment is capital and small amt interest

hope that helps
Jim

cupid_s

Yep you've only paid £186 off your mortgage. But next month you'll be paying interest on £186 less than you were this month and the extra will come off the capital. As your mortgage goes on the percentage of what you pay that's actually coming off the capital increases. Towards the very end of your mortgage you'll be paying £720 off the capital and only £11 in interest for example.

kennyboy66_2

Greenwellies,

it is true that you have only paid £186 off the capital sum this month. However you will pay a tiny bit less interest next month (about £1 less) and a tiny bit more off the capital.
Assuming you are on a 22 year term & interest rates stay the same you will be paying more capital than interest in year 12.

Hope this helps

Martinslovechild

Here's an example chart which shows the amount of interest reducing month-on-month over an example 20 year period.

Your capital payment each month effectively increases by the same net amount that the interest reduces.

Robert_Sterling

When you start a repayment mortgage almost all of the monthly payment is interest and very little is repayment of capital.

Towards the end of your mortgage period nearly all of the monthly payment is repayment of capital and very little is repayment of interest.

c'est la vie ... that is the way it is.

If you overpay a mortgage the the entire overpayment comes off the outstanding capital.

It is a lovely sight to behold.

Nationwide lets most people over pay up to £500 per month without any penalty for doing so.

talksalot81

Alot of people consider that renting is dead money. You have uncovered the lie behind this comment (for a few years at least).

Robert_Sterling

Renting is DEAD MONEY.

Martinslovechild

Robert_Sterling wrote:

Renting is DEAD MONEY.

OK, let's demonstrate an example where renting is NOT dead money.

If house prices were to crash by 40%, then the cost of an average house would reduce from approximately £170,000 to £102,000 (£170,000 * 0.6). Total amount 'lost' = £68,000.

If a person rented a property over a 5-year period which costs £600 per month, the cost = 600 * 5 * 12 = £36,000.

Therefore, the person has effectively 'saved' £32,000 by not buying a property and waiting instead for the bottom of the next housing cycle.

Starsky72_2

thats a mighty BIG "if" you have used to demonstrate that renting isn't dead money...

Greenwellies_2

WOW, thanks for all the replies.
Now I understand, but as you can imagine I was very worried!

I was concerned as I only get a change in repayment figures if the interest rate changes, but what I might look at doing is to pay a rounded up sum, as an over-payment (maybe £750, as I have an equity release loan as well)

Thanks everyone

GW