How is your mortgage balance calculated?

princeofpounds

AdrianC said:

princeofpounds said:

The calculations are called amortization.

...or even "amortisation", this side of the Atlantic.

as you wish.

AdrianC

princeofpounds said:

AdrianC said:

princeofpounds said:

The calculations are called amortization.

...or even "amortisation", this side of the Atlantic.

as you wish.

The problem is that a quick google often finds a lot of US results - and they may differ markedly. So failing to realise the difference between the two countries can easily lead to misinformation... US spelling is usually the biggest clue.

ALaw94

Thank you all for the info. I'm not currently a homeowner but am hoping to be in the near future. I was trying to work out the financials and get a picture of what position I would be in to remortgage after the initial term - for example if I get a 5-year fixed, I would likely want to remortgage (or sell) after 5 years. So I was trying to work out roughly how much I would still owe on my existing mortgage after 5 years. 
Based on the majority of your answers - I won't know the balance of my mortgage until I actually have the mortgage and can view the mortgage statement / request the balance from my lender? In which case, how can a first time buyer make an accurate assessment of the debt / equity position they are getting themselves into?  

I've tried using the mortgage calculators you get online, but these just ask for the 'interest rate' - it doesn't specify whether it's the initial term rate or the SVR. So I'm assuming whatever 'total value' this gives me isn't accurate, because it's not accounting for the fact that the interest rate isn't consistent over the total term. 

davidmcn

Ok, it would have helped if you had said that in the first place - your original question suggested that the period with the variable rate was relevant, but if you actually just want to know the balance at the end of the fixed rate period, that's an easier calculation. In fact, there's a calculator on this site:

https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

which will show you the balance at any point during the term, if you assume a constant interest rate (which for your purposes you can).

grumiofoundation

ALaw94 said:

Thank you all for the info. I'm not currently a homeowner but am hoping to be in the near future. I was trying to work out the financials and get a picture of what position I would be in to remortgage after the initial term - for example if I get a 5-year fixed, I would likely want to remortgage (or sell) after 5 years. So I was trying to work out roughly how much I would still owe on my existing mortgage after 5 years. 
Based on the majority of your answers - I won't know the balance of my mortgage until I actually have the mortgage and can view the mortgage statement / request the balance from my lender? In which case, how can a first time buyer make an accurate assessment of the debt / equity position they are getting themselves into?  

Depends how accurate you mean 

It is very simple to calculate roughly the amount you will pay off in the first 5 years 

e.g.  100000 mortgage @ 2% = £424 pcm = £5088 per year 

year 1 ~2000 interest therefore paid of ~£3100 capital
year 2 ~1940 interest (2% of 100k - 3k) therefore pay off ~3150 capital 
year 3 ~1880 interest (2% of 100k - (2x3k)) therefore pay off ~3200 capital 
year 4 ~1820 interest (2% of 100k - (3x3k)) thereofre pay off ~3250 capital 
year 5 ~1750 interest (2% of 100k - (4x3k)) therefore pay off ~3300 capital 

total paid off ~ 16000

also various calculators online e.g. 
https://www.themoneycalculator.com/mortgages/calculators/mortgage-balance-calculator/#!/dealfinder/mortgages/

kingstreet

A mortgage illustration (or ESIS for short) has a year-end balance, rates, interest paid, capital paid, monthly payments. All sorts of useful information, really!

ALaw94

davidmcn said:

Ok, it would have helped if you had said that in the first place - your original question suggested that the period with the variable rate was relevant, but if you actually just want to know the balance at the end of the fixed rate period, that's an easier calculation. In fact, there's a calculator on this site:

which will show you the balance at any point during the term, if you assume a constant interest rate (which for your purposes you can).

I hadn't noticed it previously but have now seen the 'your mortgage debt over time' graph underneath the calculator and the penny has finally dropped. Thanks.