New mortgage confusion; I can't figure this out

Savernotspender

Hello all,

I've just started a new two year fixed mortgage and I'm a bit confused on the figures and wonder if anyone can shed any light on them?

Our first mortgage amount was £1706/month so when we've got subsequent cheaper deals I've always either over paid or saved or a combo up to that amount.

We've just moved from a 1.64% deal to a 1.29% deal, our monthly payment has gone down from £1404/month to £1060/month and I've increased our mortgage savings from £302/month to £646/month.

As it was the first month the payment that was paid today was £1122 if that makes any difference.

What I'm having trouble getting my head around was that with the old 1.64% mortgage we paid the mortgage down by about £1085/month and then we saved £302/ month so we were taking £1387/month off the mortgage.

Now with the new 1.29% this month we've paid off £593 from the mortgage and saved £646 which only adds up to £1239

If we're paying in total the same £1706/month and the interest rate's gone down why are we paying £148 less a month off the mortgage?!

Can someone help me understand this?

Many thanks,

getmore4less

what term is the new deal on?
how long was the previous deal(Ie term at start of that)?
How much do you owe now and at the start of the previous deal?
(save me working them out from your numbers)

You have to be carefull with the first payment is usualy has interest for morethan a month

Savernotspender

Hi getmore4less, thanks for quick response.

The mortgage term for the new mortgage is 20 years, which I think must be slightly out as we bought our house and had a 25 year mortgage 6 years ago in July.

The mortgage before I think was for 22/23 years? We've basically been on 2 year fixes since we got our first mortgage.

We now owe £224,995, I can't remember what we were on at the start of the last deal although I can say that our original mortgage amount was £346,000 (I think we were on 2.49% but can't say for certain) and 2014 (during the 1.64% fix) we came into some money that allowed us to pay a lump sum of £59,470 (which was the amount of allowed 20% overpayment) off the mortgage - at the time they asked if we wanted to reduce the amount we paid monthly but I asked to keep it the same.

I thought that overpaying and shortening the term basically worked out the same but if that's the case why do I feel like I'm getting £148 less bang from my £1706 buck?

many thanks for all your help.

getmore4less

What may have happened is because of your overpayments the normal payment now included an element of overpayments and the real term(based on payments) was a lot shorter hence the higher capital component and now you have in effect reset the term back to 20years.

let me do some numbers and get back...

edit Any fees added to this new mortgage?

edit 2: actually should not matter as it is what you pay not the term.

Savernotspender

That would be great.

We paid the fees upfront and have done with all the fees in the past.

many thanks,

getmore4less

OK found your problem

£225k over 20years @ 1.29% £1064pm.

First month £242 interest £822 capital

Savernotspender

Ah ok, so this is just a first month issue?

So in the future I should be paying off £822 capital which with my £646 savings make it £1,468?

Which would give me £81 more bang for my £1706 buck which is more what I'd expect since the interest rate has gone down.

That makes me feel much better, thank you so much for taking the time to help me out.