Interest Only -> Repayment Query

shortchanged_2

RenovationMan wrote: »

Using my figures from when I bought my house in May 2010 with a £300k IO mortgage, the amortization calculator gives the following table:

http://www.amortization-calc.com/#loan-300,000-23-2.54-5-2010-2

Date......Interest........Principal.........Balance
2010.....$5,032.31.....$6,458.20......$293,541.80
2011.....$7,341.30.....$9,894.46......$283,647.33
2012.....$7,087.04.....$10,148.73....$273,498.60

So if I had a repayment mortgage, by May 2012 I should have repaid £26,501.39 off the principal and have a mortgage of £273,498.60. However, as a dedicated overpayer, I have repaid £50k in that same period using direct overpayments onto the IO mortgage.

I suggest you do the same with your figures and make it your first priority to 'catch up' and then your next priority to 'get ahead'!

Good luck

RenoMans figures don't add up and you are basically no better off financially on a repayment mortgage or an IO mortgage if you pay the same monthly amount towards the different types of mortgage.

He is trying to sell the fact to you that being on an IO mortgage you will be thousands of pounds better off over a period of time which is frankly misleading and simply not true.

RenovationMan

shortchanged wrote: »

RenoMans figures don't add up and you are basically no better off financially on a repayment mortgage or an IO mortgage if you pay the same monthly amount towards the different types of mortgage.

He is trying to sell the fact to you that being on an IO mortgage you will be thousands of pounds better off over a period of time which is frankly misleading and simply not true.

Ah, my resident stalker arrives. It's a shame he's so dim because it'd be nice to have a stalker that represented a challenge. All shortchanged does is lie.

I have never said that being on an IO mortgage will make anyone 'thousands of pounds better off' simply because it's not true. Shortchanged is lying because whenever he tries to debate he loses so badly that people actually laugh at him.

All I do say is that IO mortgages are more flexible than repayment mortgages for people who are in financial difficultes because you can choose to stop making repayments off the principal loan until you are back on your feet - something you cannot do with a repayment mortgage:

RenovationMan wrote: »

A lot of people with repayment mortgages think that they can easily switch to an IO mortgage when things get tough financially and are often sorely mistaken and can end up with arrears and a trashed credit history. Much better to be on an IO mortgage from the outset and make capital repayments manually.

I think shortchanged is getting mixed up with the point I make about OVERPAYMENTS and how making OVER payments can reduce a mortgage faster than just letting a mortgage run full term, thus saving on interest. This is well documented in the financial media and it just shows how mentally challenged shortchanged is that he doesn't understand this.

RenovationMan wrote: »

This is the great thing about making overpayments, it reduces your monthly mortgage interest payments, freeing up more money to make more overpayments, which reduces your monthly mortgage payments and so on in an increasing spiral of debt repayment.

As I said, shortchanged is a bit dim so hopefully by breaking down my sentences into bitesized pieces will help him understand where he is going wrong.

shortchanged_2

What do you think your example is trying to portray then RenoMan?

You make out that if you were on a repayment mortgage you would be roughly £24,000 worse off.

YOU fail to mention that if you put the same amount of monthly payments towards a repayment mortgage (including overpayments) as your IO mortgage that you would be in pretty much exactly the same position after 3 years, i.e a total of around £50,000 off the balance.

As I said his example is misleading at best.

RenovationMan

RenovationMan wrote: »

As I said, shortchanged is a bit dim so hopefully by breaking down my sentences into bitesized pieces will help him understand where he is going wrong.

Oh dear, clearly shortchanged is dimmer than even I thought!

shortchanged wrote: »

What do you think your example is trying to portray then RenoMan?

You make out that if you were on a repayment mortgage you would be roughly £24,000 better off.

YOU fail to mention that if you put the same amount of monthly payments towards a repayment mortgage (including overpayments) as your IO mortgage that you would be in pretty much exactly the same position after 3 years, i.e a total of around £50,000 off the balance.

As I said his example is misleading at best.

LOL, what a plonker, Rodney. :rotfl:

shortchanged_2

shortchanged wrote: »

You make out that if you were on a repayment mortgage you would be roughly £24,000 worse off.
.

Made a typo, now corrected.

shortchanged_2

Come on RenoMan, I've now corrected my typo.

Please explain to everyone else on here how you have managed to pay much more off your mortgage capital balance just by being on an IO mortgage than if you paid the same amount to a repayment mortgage.

RenovationMan

*sigh* this is the last time I do this for you, shortchanged. You really do need to do some evening classes or something to try and improve your reading and analytical skills. I'll break this down again and see if we can work through it for you. Hopefully you'll understand...

shortchanged wrote: »

What do you think your example is trying to portray then RenoMan?.

Right, are you paying attention? Then I'll begin...

The OP has an Interest Only mortgage on his home and due to financial constraints he hasn't been able to make any payments from his mortgage loan, he has just been paying the interest. He also doesn't have a repayment vehicle. The good news is that his finances have improved and he is able to start making payments onto his mortgage loan balance.

I suggested "Your aim with your home mortgage should be to calculate what the mortgage balance would be now if you had had a repayment mortgage from the start and to try to 'catch up' over the next few years. An amortization calculator is great for this."

What I'm saying here is that he should work out how far behind he is in his repayments and his priority should be to catch up on these payments. I gave an example of how the loan amortization works, using my own details.

Right. I'll leave you to digest that while I watch Dexter. See you later for the next step in your lessons.

shortchanged_2

RenoMan I was challenging YOUR example that you are financially better off being on an IO mortgage which I have stated is not necessarily true.

My point being that someone who knows very little about mortgages could read your example and think that it is much cheaper to have an IO mortgage which is what I am saying is misleading.

RenovationMan

shortchanged wrote: »

RenoMan I was challenging YOUR example that you are financially better off being on an IO mortgage which I have stated is not necessarily true.

My point being that someone who knows very little about mortgages could read your example and think that it is much cheaper to have an IO mortgage which is what I am saying is misleading.

I give up, you're an idiot. :rotfl:

How about you show me where I said that I was financially better of being on an IO mortgage than a repayment mortgage?

getmore4less

RenovationMan wrote: »

I also agree with others who are saying that you should not make any repayments to your BTL property. I'd go with the consensus and put any profits into an ISA with the view to paying off the mortgage when you retire (and then all the BTL profits become retirement income).

Without knowing the rates this could be a very bad approach.