Dropping to a SVR but lenders figures don't add up

tunnel

Hi all,
I've been on to my mortgage lender to check up when my current fix ends(end of january).I'm currently paying £427 a month on £58k for 18 years on a rate of 5.89%.My lenders SVR is 2.5% which i qualify for. Here's the part i don't get,they've told me my repayment part of the mortgage is £135 a month roughly leaving £292 for the interest side(at 5.89%). My maths tells me that £58k at 2.5% is £1450 for the year(or £120 a month(thereabouts)) so why are they telling me my payment is only dropping to £335.I get it at about £255 give or take a few quid. Am i missing something or are they trying to shaft me.It just doesn't add up.I work out the rate is only dropping to around 4% and not the 2.5% i'm entitled to. Could one of the fine mortgage advisors on here clarify what i'm missing here? Thanks, Tunnel :think:

opinions4u

Comes out to £336 on a mortgage calculator.

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

Thrugelmir

With precisely 18 years to run at a 2.5% interest rate. In the first year your interest will total £1,420 and your capital £2,584. Giving a monthly repayment of £333.

What you need to factor in is that as the interest you pay drops the capital element increases. With a repayment mortgage this is every month.

At 5.89% more of your repayments are weighted towards interest rather than capital.

Easier to picture this by looking at total numbers. At 5.89% over 18 years you will repay in total £92,200, at 2.5% - £71,928.

A saving (potential only ) of £20,272.

tunnel

Guess the advisor didn't explain to well. They told me the repayment part would remain the same at about £135 a month. So i guess the repayment part goes up and the interest goes down(meaning mortgage balance decreases faster). No wonder i couldn't get a grip with it,"O" level maths an all,still,would have helped if she'd given me the right info. Thanks,Tunnel

PS nice link opinions4u

Thrugelmir

tunnel wrote: »

would have helped if she'd given me the right info.

Unlikely that would understand the maths behind a repayment mortgage.