Remortgaging Q

ryanandamy

Hi all,

Apologies if this is in the wrong forum or has been answered.

My wife and I are planning on buying our first property soon and given we are likely to have 90% LTV when we do i have one eye on remortgaging at some point to improve our monthlies.

My question is this ...

If I take out lets say a 200k mortgage and the interest over the 25 years is 50k meaning 250k payable over the life of the mortgage - when i come to remortgage would my new one have to cover the 250k minus any payments or would it only include a pro rata'd interest amount (200k + 10K interest for only having the loan for a portion of the 25 years)

Hope that makes sense
Thanks in advance for any help (and also not laughing if its really obvious!!)

Trying_to_be_good

You only pay interest whilst you've borrowed the money.

So £200K mortgage, on repayment terms, means that the first month you're paying the interest on £200K and a paying back a bit of the £200K itself. Next month, the amount you pay stays the same, but the amount you now owe is a bit less than £200K, so you pay less interest, and a slightly bigger bit of the original £200K, and so the amount you owe falls again.

If you remortgage, you pay back what you still owe of the original £200K, plus any fees and charges. Not any interest that hasn't yet been incurred.

Hope that helps?

ryanandamy

Trying_to_be_good wrote: »

You only pay interest whilst you've borrowed the money.

So £200K mortgage, on repayment terms, means that the first month you're paying the interest on £200K and a paying back a bit of the £200K itself. Next month, the amount you pay stays the same, but the amount you now owe is a bit less than £200K, so you pay less interest, and a slightly bigger bit of the original £200K, and so the amount you owe falls again.

If you remortgage, you pay back what you still owe of the original £200K, plus any fees and charges. Not any interest that hasn't yet been incurred.

Hope that helps?

Thanks (I get that this might be a really simple Q!)

Just to be clear lets say i took a 200k mortgage out tomorrow and then win the lottery my balance to pay would be 200k + 1 day interest not the 200k + interest extrapolated over 25 years

Is this correct?

I think I'm getting confused because i have taken a loan out in the past and the total amount payable is the loan amount plus interest over 24 months

Thanks

AnotherJoe

ryanandamy wrote: »

Thanks (I get that this might be a really simple Q!)

Just to be clear lets say i took a 200k mortgage out tomorrow and then win the lottery my balance to pay would be 200k + 1 day interest not the 200k + interest extrapolated over 25 years

Is this correct?

Yes it is in theory.

To be pedantic there may be maximum amounts you can pay back per year, and for a period you may be limited on full repayment without incurring an early repayment charge, but in essence yes.