Mortgage/Remortgage Questions

-Jonski-

Hi all,

I've been looking over the site and guides for a simple answer to this, but I'm still a bit confused.
Essentially, I'd like to get a 95% mortgage in the near future. Once I've built up enough equity after 2-3 years (10%+), I would hope to remortgage to get a lower % deal.

I'm confused as to what values I actually remortgage on, what the early repayment charge comes from.

For example, I'm looking to borrow around £150,000 total, and after 3 years, I'll have paid at least £27,000 in. Does that mean I seek a new deal for £123,000?
Or do I need to find a mortgage to cover the whole total amount payable when the mortgage was taken out (probably around ~£210,000)

Which of these figures does the early repayment charge come from?

Any help on this much appreciated.

glentoran99

There is only an early repayment charge if you are in a fixed period, your remortgage is the balance outstanding, How are you planning on building equity? are you banking on house prices rising our overpaying your mortgage?

Thrugelmir

-Jonski- wrote: »

For example, I'm looking to borrow around £150,000 total, and after 3 years, I'll have paid at least £27,000 in. Does that mean I seek a new deal for £123,000?

The money you pay back is a combination of capital and interest on the debt owed. In the early years the repayment consists mainly of interest. As you chip away at the capital owed, the interest charged every month will gradually reduce. As a quide it's takes around 13-15 years for the monthly repayment to be more capital repaid than interest.

If you've a particular product in mind. Post up the interest rate and term. Then we can give yo a more accurate figure of what you owe.

An early repayment charge will only apply if you are still within the contractual period for the product. Remortgaging to another lender normally comes at a cost. So combined with the ERC there may no saving at all by switching.

-Jonski-

Thrugelmir wrote: »

The money you pay back is a combination of capital and interest on the debt owed. In the early years the repayment consists mainly of interest. As you chip away at the capital owed, the interest charged every month will gradually reduce. As a quide it's takes around 13-15 years for the monthly repayment to be more capital repaid than interest.

Thanks, I had misunderstood this point quite seriously indeed.

So to be clear when remortgaging, I'll need to find a new mortgage to pay off the full amount of equity outstanding and the interest owed?

Thrugelmir

On remortgaging you settle the actual balance owing on that date. Future interest does not factor.

Thrugelmir

Here's an example. A £100,000 mortgage repayable over 25 years at 4%.

Date Interest Principal Balance
Nov, 2016 $333 $195 $99,805
Dec, 2016 $333 $195 $99,610
2016 $666 $390 $99,610
Jan, 2017 $332 $196 $99,415
Feb, 2017 $331 $196 $99,218
Mar, 2017 $331 $197 $99,021
Apr, 2017 $330 $198 $98,823
May, 2017 $329 $198 $98,625
Jun, 2017 $329 $199 $98,426
Jul, 2017 $328 $200 $98,226
Aug, 2017 $327 $200 $98,026
Sep, 2017 $327 $201 $97,824
Oct, 2017 $326 $202 $97,623
Nov, 2017 $325 $202 $97,420
Dec, 2017 $325 $203 $97,217
2017 $3,941 $2,393 $97,217
Jan, 2018 $324 $204 $97,013
Feb, 2018 $323 $204 $96,809
Mar, 2018 $323 $205 $96,604
Apr, 2018 $322 $206 $96,398
May, 2018 $321 $207 $96,191
Jun, 2018 $321 $207 $95,984
Jul, 2018 $320 $208 $95,776
Aug, 2018 $319 $209 $95,568
Sep, 2018 $319 $209 $95,358
Oct, 2018 $318 $210 $95,149
Nov, 2018 $317 $211 $94,938
Dec, 2018 $316 $211 $94,726
2018 $3,843 $2,491 $94,726
Jan, 2019 $316 $212 $94,514
Feb, 2019 $315 $213 $94,302
Mar, 2019 $314 $213 $94,088
Apr, 2019 $314 $214 $93,874
May, 2019 $313 $215 $93,659
Jun, 2019 $312 $216 $93,443
Jul, 2019 $311 $216 $93,227
Aug, 2019 $311 $217 $93,010
Sep, 2019 $310 $218 $92,792
Oct, 2019 $309 $219 $92,574
Nov, 2019 $309 $219 $92,354
Dec, 2019 $308 $220 $92,134
2019 $3,742 $2,592 $92,134
Jan, 2020 $307 $221 $91,914
Feb, 2020 $306 $221 $91,692
Mar, 2020 $306 $222 $91,470
Apr, 2020 $305 $223 $91,247
May, 2020 $304 $224 $91,023
Jun, 2020 $303 $224 $90,799
Jul, 2020 $303 $225 $90,574
Aug, 2020 $302 $226 $90,348
Sep, 2020 $301 $227 $90,121
Oct, 2020 $300 $227 $89,894
Nov, 2020 $300 $228 $89,665
Dec, 2020 $299 $229 $89,437

2037 $1,015 $5,319 $22,476
Jan, 2038 $75 $453 $22,023
Feb, 2038 $73 $454 $21,569
Mar, 2038 $72 $456 $21,113
Apr, 2038 $70 $457 $20,655
May, 2038 $69 $459 $20,196
Jun, 2038 $67 $461 $19,736
Jul, 2038 $66 $462 $19,274
Aug, 2038 $64 $464 $18,810
Sep, 2038 $63 $465 $18,345
Oct, 2038 $61 $467 $17,878
Nov, 2038 $60 $468 $17,410
Dec, 2038 $58 $470 $16,940
2038 $798 $5,536 $16,940
Jan, 2039 $56 $471 $16,469
Feb, 2039 $55 $473 $15,996
Mar, 2039 $53 $475 $15,521
Apr, 2039 $52 $476 $15,045
May, 2039 $50 $478 $14,568
Jun, 2039 $49 $479 $14,088
Jul, 2039 $47 $481 $13,607
Aug, 2039 $45 $482 $13,125
Sep, 2039 $44 $484 $12,641
Oct, 2039 $42 $486 $12,155
Nov, 2039 $41 $487 $11,668
Dec, 2039 $39 $489 $11,179
2039 $573 $5,761 $11,179
Jan, 2040 $37 $491 $10,688
Feb, 2040 $36 $492 $10,196
Mar, 2040 $34 $494 $9,702
Apr, 2040 $32 $495 $9,207
May, 2040 $31 $497 $8,710
Jun, 2040 $29 $499 $8,211
Jul, 2040 $27 $500 $7,710
Aug, 2040 $26 $502 $7,208
Sep, 2040 $24 $504 $6,704
Oct, 2040 $22 $505 $6,199
Nov, 2040 $21 $507 $5,692
Dec, 2040 $19 $509 $5,183
2040 $338 $5,996 $5,183
Jan, 2041 $17 $511 $4,672
Feb, 2041 $16 $512 $4,160
Mar, 2041 $14 $514 $3,646
Apr, 2041 $12 $516 $3,130
May, 2041 $10 $517 $2,613
Jun, 2041 $9 $519 $2,094
Jul, 2041 $7 $521 $1,573
Aug, 2041 $5 $523 $1,050
Sep, 2041 $4 $524 $526
Oct, 2041 $2 $526 $0

-Jonski-

Thrugelmir wrote: »

Here's an example. A £100,000 mortgage repayable over 25 years at 4%.

...
Date Interest Principal Balance
Dec, 2018 $316 $211 $94,726
2018 $3,843 $2,491 $94,726

Great, that's helpful. So, if we assume I took out a 2yr fixed and I wanted to remortgage in December 2018 and there are no ERC's.

I would effectively need a brand new mortgage for $94,726, and would have built up $2,491 in equity via the mortgage in addition to my deposit and any overpayments ?

Thrugelmir

-Jonski- wrote: »

I would effectively need a brand new mortgage for $94,726, and would have built up $2,491 in equity via the mortgage in addition to my deposit and any overpayments ?

Spot on.

If you can make overpayments of any kind then over time you'll see the benefit. Will be slow to start with. As the saving in interest takes time to compound.