Why am I paying so much interest with every mortgage payment?!

Aefb2017

I took out my £95,500 mortgage in July 2016, 3 years ago. Fixed rate for 5 years, interest rate of 2.69%.

My monthly mortgage payments are £334.

Every month, for 3 years, about £205 of my £334 each month has gone towards interest, meaning that each month, I only pay off about £130 of my actual mortgage.

Why is this still happening, 3 years on? 2.69% of 95500 is about 2500, which I would have paid in interest a long long time ago.
I might be a little less confused if the amount going towards interest every month got lower, but it isn’t - if anything it’s getting higher.

Either my maths is wrong, or my understanding of my own mortgage is bad!

Please can someone help me figure this one out?

Aefb2017

Forgot to add, my current mortgage balance remaining is 91,047

SonOf

In the first 5 years of a 25 year term, you barely pay off anything. If your mortgage term is longer, then it will be longer than 5 years before you start seeing much acceleration in the capital payments.

getmore4less

£90,000 *0.0269/12

Going to be over £200pm till you go under £90k

Thrugelmir

How many years did you take your mortgage out over?

[Deleted User]

Aefb2017 wrote: »

Why is this still happening, 3 years on? 2.69% of 95500 is about 2500, which I would have paid in interest a long long time ago.

Your APR isn't a one off fee.

It's an annual percentage rate of interest.

ACG

In the early years the majority of your payments goes towards interest, in the latter years the majority goes towards the balance. This site is useful to see it in a table. https://www.amortization-calc.com/mortgage-calculator/

AnotherJoe

Aefb2017 wrote: »

I took out my £95,500 mortgage in July 2016, 3 years ago. Fixed rate for 5 years, interest rate of 2.69%.

My monthly mortgage payments are £334.

Every month, for 3 years, about £205 of my £334 each month has gone towards interest, meaning that each month, I only pay off about £130 of my actual mortgage.

Why is this still happening, 3 years on? 2.69% of 95500 is about 2500, which I would have paid in interest a long long time ago.
I might be a little less confused if the amount going towards interest every month got lower, but it isn’t - if anything it’s getting higher.

Either my maths is wrong, or my understanding of my own mortgage is bad!

Please can someone help me figure this one out?

You are not a "little" confused: as the saying goes, you aren't even wrong. Your understanding of how mortgages work is indeed catastrophically bad
2.69 % APR where APR stands for Annual Percentage Rate means you pay 2.69% annually. Not once !
And you must be very confused or reading wrong to think what you are paying in interest is going up. It won't be. Each year you'll pay a bit less interest and a bit more capital. All from the same fixed amount.

grumiofoundation

(91047*0.0269)/12 = 204.1

I mean seriously you took out a mortgage without being aware how mortgage interest works?

enthusiasticsaver

Aefb2017 wrote: »

I took out my £95,500 mortgage in July 2016, 3 years ago. Fixed rate for 5 years, interest rate of 2.69%.

My monthly mortgage payments are £334.

Every month, for 3 years, about £205 of my £334 each month has gone towards interest, meaning that each month, I only pay off about £130 of my actual mortgage.

Why is this still happening, 3 years on? 2.69% of 95500 is about 2500, which I would have paid in interest a long long time ago.
I might be a little less confused if the amount going towards interest every month got lower, but it isn’t - if anything it’s getting higher.

Either my maths is wrong, or my understanding of my own mortgage is bad!

Please can someone help me figure this one out?

You do not understand how mortgages work. 2.69% is the annual interest rate not a one off.


I have put your details into a loan calculator and if I am not mistaken you took your mortgage over what looks like a 38 year term which is a very long time. The mortgage will barely go down in the early years particularly if you took it out over so long a period.


In the early years your payment is mainly interest and minimum repayment of capital. As you get closer to the end then your repayments will start to make an impact on the capital. Barely £100 would have been coming off the capital in the first year each month. The interest is charged on a daily basis so the amount of interest you get charged each month changes depending on the number of days in the month but it should not be getting higher.

Aefb2017

Thanks to those who were helpful, I didn’t realise the interest was annual. That’s all I needed to know.

As usual from MSE, though, some of the comments are rude and unnecessary.