Mortgage Number Help

Sausfest

Hello,

I can't seem to figure out the maths behind this, maybe i'm just a little too tired.
If I had a mortgage of 90,000 over 35 years @ 4%, i'm unsure what this would be repayment wise, 300 per month?

Anyway, out of this payment, how much of it is interest and how much of it is me paying off the mortgage? Basically, how much have I invested and how much is interest? Stupid question I know, sorry.

Real Life Example (Natwest)
Mortgages 5 year fixed rate
Initial Rate 3.57%
Rate thereafter 4.24%
Monthly Payment £375.62

How much of this is interest and how much is me paying into the bricks.

AdrianC

Sausfest wrote: »

I can't seem to figure out the maths behind this, maybe i'm just a little too tired.
If I had a mortgage of 90,000 over 35 years @ 4%, i'm unsure what this would be repayment wise, 300 per month?

Anyway, out of this payment, how much of it is interest and how much of it is me paying off the mortgage? Basically, how much have I invested and how much is interest? Stupid question I know, sorry.

Real Life Example (Natwest)
Mortgages 5 year fixed rate
Initial Rate 3.57%
Rate thereafter 4.24%
Monthly Payment £375.62

How much of this is interest and how much is me paying into the bricks.

Have a play with this...
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

£300 is interest-only money. What repayment vehicle do you have in place, and how much are you investing in it?

If you look at a repayment mortgage, then £90k at 4% over 35yrs is £398/mo repayment, assuming no fees etc, and you're repaying over £167k,
If you can shrink the term to 30 or 25yrs, roughly each 5yrs off sees you paying an extra £30/mo but saving you £13k over the life.

As the graph shows, the proportion of the monthly payment that goes in interest varies over the life of the mortgage - in year 1, it's almost all interest (because you're still paying interest on the full amount borrowed). By the end of the term, it's almost all repaying capital (because there's so little outstanding capital left).

ACG

The amount that goes to the capital and the interest will change monthly depending on the number of days in the month and the balance. General rule of thumb though is you pay less in interest ever month.

This site is in US Dollars but just imagine it has a £ instead - https://www.amortization-calc.com/mortgage-calculator/ - it gives you a break down month by month. Also bare in mind that you would not have 4% for 25 years, it would usually be a 2-5 years followed by SVR or a new deal and so on.

Sausfest

I found this:
"If you wanted to borrow £160,000 over a 25-year period at an example mortgage rate of 2.5%, y our monthly payments would be £718, assuming interest rates stay the same. The total amount you’ll pay over the term is £215,336, made up of the £160,000 capital you borrowed and £55,336 in interest."

I honestly can't figure out how this amount of interest was made up.

Basically, i'm trying to figure out (for example purposes) that if I paid 500 p/m on a 4% mortgage.
How much of that £500 would be me paying off the mortgage and how much would be interest, nothing exactly, just a rough estimate, so I can do some financial planning. I'm guessing 4%, so £480 paid off and £20 interest? Or is it annually?

AdrianC

It's a bog standard amortisation calculation. Not exactly mental-arithmetic stuff, but not rocket science.

Put those numbers into the MSE calc, and the same numbers come out. There's a graph and table to show annual outstanding balance. Remember that you aren't borrowing the entire amount for the entire duration... If we simplify to annually, you're borrowing £8,500 for 24yrs, £8,300 for 23yrs, £8,100 for 22yrs etc etc.

kingstreet

In the early years, you pay back less of the capital as the outstanding loan is highest.

As each year passes, the amount you owe reduces so the amount of interest you pay reduces and your capital reductions accelerate.

See this graph;-

http://www.mortgageroute.co.uk/capital-repayment-mortgages.html

getmore4less

Sausfest wrote: »

Hello,

I can't seem to figure out the maths behind this, maybe i'm just a little too tired.

There are calculators that do the maths for you but it can help to understand the basics behind Amortization.

https://en.wikipedia.org/wiki/Amortization
and for loans
https://en.wikipedia.org/wiki/Amortizing_loan


there are only 4 variables for a loan with levell payments

Amount,
Rate,
Term,
Payment.

Pick any 3 and you can work out the 4th.

ThePants999

Sausfest wrote: »

Basically, i'm trying to figure out (for example purposes) that if I paid 500 p/m on a 4% mortgage.
How much of that £500 would be me paying off the mortgage and how much would be interest, nothing exactly, just a rough estimate, so I can do some financial planning. I'm guessing 4%, so £480 paid off and £20 interest? Or is it annually?

The key point you're missing is that it changes every month. If you have a 4% mortgage, then every month you pay one-twelfth of 4% of the entire amount you owe in interest, and the rest of the repayment pays off some of what you owe. But because you paid off a bit of what you owe, the next month's "one-twelfth of 4%" is a bit lower, so the amount that goes on repaying what you owe is a bit higher. Near the start, you're paying almost entirely interest and very little of the mortgage is getting paid off every month, but it snowballs until - near the end of the term - you're paying very little in interest and mostly repaying capital.