Percentage of Borrowing with SVR Mortgage

davidb2002

Hi Everyone,

I'm on a Standard Variable Rate Mortgage (been on it for years now due to low rates). I recently received my annual mortgage statement from my lender and was surprised at what appeared to the the lack of repayment I have made towards my borrowing. I've paid just over £5k last year, which £3k was interest!

Does this seem normal? I thought has I progressed through my mortage term that a larger percentage of my payment would go towards my borrowing and less on interest. Or is that only during tied in terms (i'm not currently tied in).

And with that, could I potentially be better off switching? I'm looking for the most efficient way to pay off my mortgage (without overpaying).

Cheers!

TrickyDicky101

Please quote your current mortgage balance, the remaining term (presumably it still has quite a few years left?) and the interest rate you are being charged. Please also quote the monthly repayments you have been making.

Someone will be able to do the maths and advise further then.

YHM

Why would you just knowingly sit on an SVR mortgage?

davidb2002

I have around £88k left, payments are around £410/month, SVR is 3.99%. Remaing terms is like 23 years. Ltv is around 75%

Why would you just knowingly sit on an SVR mortgage?

From what I understand, when you move to a fixed term mortgage, you pay less of your borrowing off per payment during the fixed term in comparison if you are out of the fixed term and have been on the same product for a while. (by fixed I mean the term you agree to stay with them otherwise penalties for leaving).

Please correct me if i'm wrong. I worked for a mortgage broker quite a few years ago (when 100% interest only were still a thing), so perhaps the game has changed since or I totally have the wrong end of the stick.

Furthermore, I want to avoid adding anything else onto my borrowing and usually switching incurs additional fees from either 1) current provider, 2) new provider or 3) solicitors. This would make switching counterproductive, unless there are 0 fees or can be paid off extremely quickly.

YHM

Sorry that's very wrong. The amount you pay off your capital balance on your mortgage is based on the interest rate you are sat on and how this interest is accrued (daily, monthly etc).

For a mortgage of that size, a fee free package would be most appopriate for you anyway, which would remove the costs / fees you mentioned.

Comparably the best fee free rate available to your LTV will be circa 1.75%. A lot less interest than what you are paying now....

davidb2002

Any recommendations for an online mortgage search? I usually end up just adding any fees onto the borrowing, however, with the size of my mortgage, it's really best I find something with 0 fees.

After reading a few other posts, I think it's the mortgage statement's layout that has confused me. The balance is before interest, then add the interest, deduct the annual payment = new balance.

Furthermore, i've always been keen to avoid fixed terms as uncertainty of wishing to move.

YHM

I'm a broker. I don't advocate self selection, so cannot help on that front.

Much better you sit down with someone who knows what they are doing, then just chuck figures into a machine and hope for whats best...

TrickyDicky101

@3.99% with a balance outstanding of £88k each month you will be charged interest of

88,000 * 3.99% / 12 = £292

This will reduce slightly each month as you repay more of the outstanding balance, but not by that much as it is still early days on your mortgage.

So what that means is that of your £410 monthly repayments, only c.£118 will be repaid off of the balance this month. So it is no surprise that you would have paid so much interest last year I'm afraid.

Have you asked about your current lender's customer retention products? Even ones without fees will probably be significantly better than 3.99%.

davidb2002

Thanks guys! You've really shed some light on some things I wasn't aware of. time to go and save some money.

Thrugelmir

davidb2002 wrote: »

I have around £88k left, payments are around £410/month, SVR is 3.99%. Remaing terms is like 23 years. Ltv is around 75%

In approximate term terms you'll be paying more interest per month until around September 2023.

At a 3.99% interest rate. Worth paying into the mortgage whatever you can scrap together. While working out your next move.