Can I ask a really stupid question on mortgages please?

Corv99

:-) OK here goes...
If I get a mortgage for £200k , and with interest that's say  £240k debt 
if its fixed, tied in for 2 years , then I get another deal, but pay in a lump of money to reduce it..
is my debt the £200k , or do I owe to the bank £240k debt?  does that make sense ? 
( obviously it would be minus payments for the two years, but keeping it simple its the principal I was wanting to be clear on)

I'm looking to buy some where, which needs a fair bit of work before being able to move in, so wanted to sell my current place after a couple of years for example..
houses are similar value, but I'm wondering If my plan to reduce mortgage is real, or actually am I ultimately going to be increasing my debt by quite a bit

thanks,

ACG

The £40k is not added to the loan on day one. That would be something you paid over 20 years or whatever it takes. 

It is impossible to say what the interest would be as it depends on many things:
1) The date you pay your mortgage each month - if you pay it late or alter the date, that can affect things,
2) The interest rate you pay is (in your example) only fixed for 2 years, but your mortgage is for say 20 years. You do not know what the interest rate will be in 2 years, 5 years, 10 years etc. 
3) As you say, whether or not you make any overpayments, when you do it (the sooner you over pay the sooner you stop paying interest on that amount) and how much you overpay. 

Your £200k mortgage might end up being £198k in 2 years time, if you then overpay £10k the £10k will come off the balance so it would be £188k. But you would have paid more than £12k in repayments, you might have paid say £16k, so £10k was your overpayment, £2k of your monthly repayments came off the balance the other £4k you paid in monthly repayments over those 2 years would have been interest.

Hopefully that makes sense. 

Corv99

brilliant thankyou ...
yes i had used 2.4% for the example...
what I'm hoping is to get around say £180k for mine, current morgage left on it £50k .. so at that point use some for work on house, and drop £100k off the house at that point...    but I was 100% if the bank wanted then... I assumed the original debt ( hoped!!) and not the debt plus interest ... but as unfortunately  we have to get mortgages the banks are in the driving seat!!
indeed the plan would be to over pay and clear ASAP .. currently I have six years left on my mortgage, want to move inot this new one / project .. but don't want to extend the mortgage out if I can help it, and aiming to clear it off as soon as i can.. not moving again after this!! :-)  

[Deleted User]

A really simple calculator i have used for years.  It wont give an exact figure due to differences in calculation methods and dates of payments as ACG says, but it gives a rough idea of how it works in an easy format

https://www.theguardian.com/money/loan-repayment-calculator-interest-rates

Also, its only a stupid question if you know the answer so feel free to ask anything on these forums 

Corv99

thankyou :-) 

enthusiasticsaver

Corv99 said:

brilliant thankyou ...
yes i had used 2.4% for the example...
what I'm hoping is to get around say £180k for mine, current morgage left on it £50k .. so at that point use some for work on house, and drop £100k off the house at that point...    but I was 100% if the bank wanted then... I assumed the original debt ( hoped!!) and not the debt plus interest ... but as unfortunately  we have to get mortgages the banks are in the driving seat!!
indeed the plan would be to over pay and clear ASAP .. currently I have six years left on my mortgage, want to move inot this new one / project .. but don't want to extend the mortgage out if I can help it, and aiming to clear it off as soon as i can.. not moving again after this!! :-)  

As said above the interest is not put on your mortgage on day 1, it is calculated daily and then added to your mortgage normally monthly but obviously your monthly repayment also brings the balance down so you will never owe more than the initial amount you borrow assuming you go for repayment and not interest only.  Also bear in mind if you go for fixed rates you will no doubt have what they call an ERC  if you repay it before the term is finished.  At the end of each deal generally you get a new one. 

If you expect to get £180k for your current home and the mortgage is only £50k you do not have to use the whole equity of £130k (less costs) towards the new house.  You can keep some back to do the work you need to on the new property. Obviously your income would have to fulfill the normal income multipliers for the new mortgage though. I am a little unclear as to what it is you are wanting to do though so that may not be your question?