Some Mortgage figures help

TeddyT_2

Hi there,

Just working out some figures and want to make sure I'm on the right tracks here.

I want to borrow £170,000
Deposit - £10,000
Repayment @ 6% = £1100 per month
Overpayment will be £700 with no penalties

Over a period of 1 year would have paid off ~ £21,000.

Now say one year from now I decided to sell and get £200,000 considering HPI ~ 10% (Optimistic!)

How do I work out how much I would owe the lender? Am I being too thick here? I think what I cant get my head round or if I am making it more complicated for myself is the interest payable after the year. What interest is owed?

Cheers

JoeK_3

A capital and interest mortgage only pays off a small amount of the capital value of the mortgage in the early years.

You should receive a Keyfacts document from the lender showing the capital outstanding on your mortgage each year. If you have not received this, request one.

JoeK

AndrewSmith

TeddyT wrote: »

Hi there,

Just working out some figures and want to make sure I'm on the right tracks here.

I want to borrow £170,000
Deposit - £10,000
Repayment @ 6% = £1100 per month
Overpayment will be £700 with no penalties

Over a period of 1 year would have paid off ~ £21,000.

No, you wouldnt have paid off £21,000. After 1 year (assuming a 25 year mortgage) you will have paid off £3,026 from the regular £1,100 per month payments and £8,400 from the overpayments, making a total of £11,426.

Don't forget that in the early years of a repayment mortgage a large proportion of your monthly payment is in fact interest.

Now say one year from now I decided to sell and get £200,000 considering HPI ~ 10% (Optimistic!)

How do I work out how much I would owe the lender? Am I being too thick here? I think what I cant get my head round or if I am making it more complicated for myself is the interest payable after the year. What interest is owed?

Assuming it is one year later and if the value had indeed increased to £200,000 then you would have to repay the lender £158,574 plus any exit/redemption fees, thus leaving you with £41,426.

You are not being thick (as you put it) but are not allowing for any interest element within the monthly payments you make.

Mortgages are not like unsecured loans. With an unsecured loan the amount you borrow plus interest is added at the beginning then simply divided by the number of months over which you are going to repay. This means that every month you reduce the balance by the amount you pay them.

Mortgages work on a 'pay as you go' basis when it comes to the interest in as much as you pay the interest on a monthly basis for as long as you owe them the money.

Jonbvn

Hi,

You can get details here. Disregard the fact that the it is quoted in US$!

You can get a mortgage calculator here.

FYI, mortgage interest is usually calculated daily, and subsequently paid monthly by you.

HTH