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Mortgage payment formula for annual interest?
redonion
Posts: 215 Forumite
Santander (as an example) say that their mortgage rates are on the basis of annual interest calculation rather than daily or monthly.
What is the formula for the mortgage repayment amount when interest is calculated annually? The assumptions of the standard formula are not valid in this case, I think (i.e. if that formula were applied, the mortgage wouldn't get repaid by the end of the mortgage term).
I haven't yet picked a mortgage provider, and having not dug through any paperwork, I'm not actually 100% sure what "interest is calculated annually" means. Does it also mean that your repayments are calculated as if they had been paid at the end of the year? Or is it literally just the interest payment amount that is calculated yearly, on the basis of the principal at that time? When does that typically happen - 31st Dec?
Obviously MANY extra points for "showing your workings"
What is the formula for the mortgage repayment amount when interest is calculated annually? The assumptions of the standard formula are not valid in this case, I think (i.e. if that formula were applied, the mortgage wouldn't get repaid by the end of the mortgage term).
I haven't yet picked a mortgage provider, and having not dug through any paperwork, I'm not actually 100% sure what "interest is calculated annually" means. Does it also mean that your repayments are calculated as if they had been paid at the end of the year? Or is it literally just the interest payment amount that is calculated yearly, on the basis of the principal at that time? When does that typically happen - 31st Dec?
Obviously MANY extra points for "showing your workings"
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