Does this sound right?

Samx41

I asked my OH to ring up his mortgage providers to see what 'our' balance was. He has had the repayment mortgage for 4 1/2 years. They said that all the interest has been paid off and now the monthly repayment will go to clearing the balance. It's a 25 year repayment capital and interest mortgage. Does this sound right?

kidmugsy

Samx41 wrote: »

Does this sound right?

No: sounds like baloney to me.

Dave_Ham

Unfortunately the bank must have brought their kids to work that day and let them answer the phone.

Seriously though, definitely not. If on a standard 25 years term, unfortunately after 4.5 years whatever figure you hope you have paid off I can pretty much guarantee it will be less when you call up so please be prepared.

By the time product fees are added (and usually forgotten) and the manner in which the interest is calculated you pay off less in the early years of the mortgage term.

GMS

Not quite this simplistic but to give a general idea of how it works assume a 25 year mortgage (300 months) with payments of £600 per month.

Month 1 - £2 capital repayment, £598 interest
Month 2 - £3 capital repayment, £597 interest..........................

Month 299 £597 capital repayment, £3 interest
Month 300 £598 capital repayment, £2 interest.

As I say this is an idea not a true reflection but basically you will pay almost all interest early on and almost all capital near to the end. To say all interest has been cleared after 4 1/2 years is absolute nonsense. Some interest will be paid with the last ever payment, albeit a tiny percentage of the total amount of that monthly payment.

Put numbers into the calculator here http://www.calculator.net/mortgage-calculator-uk.html to get an accurate answer.

kingstreet

Don't personal loans involve paying all the interest at the outset, then the capital repayments start?

It certainly isn't the way a mortgage works.

As GMS and Dave have said, as each year passes, the amount you owe and the interest on that reduces, so you pay mostly interest in the early years and mostly capital in the later ones.

On a typical 25 year mortgage, half the capital is repaid in the last seven years.

Samx41

Thanks I thought it sounded odd. I will get OH to phone again in prep for seeing a financial advisor in dec/jan. We have saved 16k deposit for a 160k ish property but hoping to get a property for a bit less. Now saving for all the other fees and negative equality on our property... It's hard work lol

Anyone have a list of out goings for a newbie to house buying? so far i have:

Estate agent fee to sell up (?1-4% of our property??)
??? Estate agent fee for new property?? Not sure on %)
Stamp duty on new property again not sure of %
Mortgage fees ?1k
Solicitors fees not sure how much
I'm sure there are more

kingstreet

Estate agency selling fee should be no more than 1.5% + VAT

EA fees when buying - nil

Solicitor's costs for sale and purchase - £1,700 inc VAT & disbursements

Stamp duty 1% on £125,000 to £250,000.

Mortgage - valuation fee £300 on application, another £200 for the lender's surveyor to do a Homebuyer's report for you. Arrangement fee - anything from nil to £2,000, probably addable to loan. Pick a rate which suits you best. A medium rate with low fee may be preferable to high fee/very low rate option. It varies.