Confused! Can anyone help?

EchoDelta

Apologies if this is a daft question but we're confused!

Have been over paying the mortgage by making lump sums to reduce the term by a month at a time.

First time I called mortgage co to ask what sum would reduce it by a month they said c£260. The next time, about 6 weeks later it was £290 and today it was £299.

Why does it change? Can't get my head around it at all!

Planning to give them a call tomorrow but can anyone shed any light in the meantime as it's really hurting my brain!

Thank you

EchoDelta

I have to confess that I don't completely understand the explanation from the mortgage company but it's because the proportion of the monthly payment that goes on interest decreases over time and the proportion that goes on capital increases so the lump sum to decrease the term by a month increases the closer you get to the end. I sort of get it....

edinburgher

I had figured that this was the explanation!

wantabetterlife

That's what I was about to say in a long drawn out way...at the beginning most of the mortgage payment is made up of interest and only a small part comes off the capital so it is easier to shed the months, but it is confusing to get your head around. On the positive side you are paying 39 pounds a month less interest than you were at the start (299-260). Hope that makes sense

EchoDelta

wantabetterlife wrote: »

On the positive side you are paying 39 pounds a month less interest than you were at the start (299-260). Hope that makes sense

Oooh now that I do understand - and like! A lot!