I don't understand my Mortgage payments

timboy1984

Hoping somebody can clarify, as I just don't understand.

I'm on the help to buy scheme having provided a deposit for 8,000 on a purchase price of 136,000.

When my mortgage payments of 650.00 Natwest take 540.00 away. What's this for? Where is it going and why?

I had assumed 650 would just come out every month and chip away at the total value of the house?

Any advice welcome.

Cheers

kingstreet

Each payment is made up of interest on what you owe, plus an amount which reduces what you owe.

As each year passes, the amount you pay in interest drops and the amount you pay to reduce what you owe increases.

By the end of the mortgage term, what you owe has reduced to nil.

lee111s

As above, it's interest. You always pay proportionaly more in the early years.

I borrowed £105,000 and pay £525 a month. Between £370 and 380 a month are on interest.

This is why overpaying your mortgage will drastically reduce the length of the mortgage as all overpayments come off the outstanding capital.

kingstreet

In the early years you have a capital and interest mortgage.

In the later years you have a capital and interest mortgage.

HTH

SG27

I find this calculator useful for seeing what interest you are paying each month. Click on amortisation schedule after puting in your details.

http://www.creditmarket.co.uk/mortgage-calculator/