Repayment mortgage- pay off early

LoopyLou1234

Please can anyone advise me- I have a repayment mortgage that has 9 years left to run with a balance of £55,000
I have asked for a full early resettlement figure and am surprised that it says balance owed is £55,000. There is an £80 exit fee to pay which I understand but I am confused as I thought paying this off early would mean there was less to pay? Can anyone advise please ...thank you in advance

Thrugelmir

If you owe £55k then that's what you need to repay. Why do you expect to receive a discount?

csgohan4

but if you took longer to pay there would be more to pay due interest

flashg67

The 'only' saving you'll see by early repayment is the difference between what you owe, ie £55k, and the total you would repay over the next 9 years if you carry on as you are. You know your repayment, so presuming interest rate stays the same over the next 9 years, it's easy to work out the difference

sal_III

I suspect you are mixing up the balance and total amount you are to pay according to your payment schedule. Where it's the amount (principle) you still owe at this point in time.

If you look at your payment schedule and sum all your future payments for the next 9 years (it should be already summarised), the total amount will be quite different as it will include the interests for the next 9 years.

By paying the £55k now you are saving on interests for the next 9 years.

LoopyLou1234

Sorry to sound thick but when I rang up they said they needed to calculate the interest which would be deducted. My question is also when you look at the breakdown of your actual repayment each month e.g. £400 mortgage and £100 interest is it the interest between settling the full amount that!!!8217;s deducted from the overall outstanding amount- explanations please in easy to understand terms- thank you

sal_III

You took a mortgage for say £100k a while back.

As it is a repayment mortgage each month you repay part of the principle (the initial £100k) plus interests on the remaining balance. Meaning that each month you are knocking off couple of £100s of your principle. This should be all explained in the payment schedule of your mortgage.

Few years down the line you have managed to knock off £45k from your principle leaving you with £55k balance.

Once again the balance is not the sum of what you are scheduled to pay in the next 9 years. It is the remaining unpaid part of the original amount you borrowed.

HTH

Thrugelmir

LoopyLou1234 wrote: »

Sorry to sound thick but when I rang up they said they needed to calculate the interest which would be deducted.

Interest will be charged on the outstanding debt up to the day of redemption. This will be allowed in the final redemption figure.