Calling Mr Raygun's Maths talents..!

"NC" wrote

You'll need to tell us how much the property will appreciate/depreciate in value over the next 3 years for us to determine this! :-) [Crystal-ball time] [Ie you want loan to be 80 or 90% of *what* in 3 years' time? Same as today? 30% lower than today? 20% more than today? ... ]

You haven't said what the term is, on which the payments are based. Let me guess that it's 25 years. You also haven't made clear whether your lender uses annual or monthly rests. If annual, your current monthly payments should be £632.19, but if monthly they should be £625.08. Let me guess that it's the former.

If you do nothing, your balance will fall in 3 years to

(1-1.049^-22)/(1-1.049^-25) of its initial value. That's 93.3%.

For a first approximation by Mickey Mouse method, to reach 90% you should simply overpay 3.3% of £108k over 36 months, which is £99 a month. To achieve 80%, overpay 13.3%, which is £399 a month.

For a more accurate answer, you need to work out by how much the overpayments would shorten the term in order for 3 years to pay down 90% or 80%. So you need to solve

(1-1.049^-(X-3))/(1-1.049^-X) = 0.9 or 0.8

for X, and then work out the repayments from that. Not straightforward.

almost - its 25years, but monthly interest. I assume that this doesn't make

*too* much difference to the above estimate calculation ? Thanks for the help - I am planning to overpay by about 500 and so should be well below the 80% level in 3 years time.

Assuming same value as now (hopefully it will go up :) )

As I was saying, this is not straightforward but there is an easier way. See below.

Not much, no. In 36 out of 300 months, the debt will be down to

(1-f^-264)/(1-f^-300) of the original, where f=1+0.049/12.

I make that 93.4% or £100877. If you want to get it down to 90% or 80% (£97200 or £86400), you need to work out how to save up £100877-£97200=£3677 or £100877-£86400=£14477 over 36 months in a virtual savings account which pays interest at the same rate of 0.40833% per month. The monthly requirement is (f-1)/(f^36-1) of the target amount. That is £95.02 or £374.12. As one might expect, this is a little less than by Mickey Mouse.

This would increase the monthly payments from £625.08 to £720.10 or to £999.20, which would reduce the term from 300 to 232 or

143 months. And if you work out (1-f^-196)/(1-f^-232) [196 being 232-36] you get 89.96% and for (1-f^-107)/(1-f^-143) [107 being 143-36] you get 80.02%. Close enough to the targets of 90% and 80%.

If you back-calculate the required payments based on 232 and 143 month terms, you get £721.20 and £998.58. The numbers don't match exactly because the term lengths have had to be rounded to a whole number of months.

Good point.

again - I am in your debt. Thankyou.

In article , NC writes

Neil,

When did you buy, and where? It is possible that the value may grow enough in a few months, or a year, or whatever, to make your 80% or 90% without doing anything different.

However, presumably, you will have a penalty if you redeem the mortgage before the end of the fixed period, so it may not be appropriate to remortgage before 3 years.

There is a good chance that the equity will build to a decent level without me doing anything. However, as I am in thge fortunate position to be able to afford to overpay, I figured I may as well set the overpayments with a target in mind. Whilst the redemption penalty for early repayment within the fixed period isn;t too bad, its bad enough not to consider doing it unless the property price goes up vastly. With the state of the market slowing at the moment, I'm not hopeful !

My "mickey mouse" spreadsheet gives me figures of 103.50 p.m.for 90% and

391.00 p.m. for 80%.

Unless Mickey Mouse can plead operator error, it sounds like a job for Sylvester.

Use the goalseek option on your spreadsheet to work it out.

Huh? The only sheets I spread are on my bed.

Why now consider the mortgage as two parts a) An interest only part (A) that will still be owed after 3 years b) A repayment part (B) that will be repayed over 3 years (36 months) and sum the payments of these two parts to find the amount to pay?

For 80%, A = 0.8*£108,000 = £86,400 and B = 0.2*£108,000 = £21,600 For 90%, A = 0.9*£108,000 = £97,200 and B = 0.1*£108,000 = £10,800

Bruce

Yesh, I'll drink to that.

I've now looked up how you calculate repayments and using the formula P = B*(f-1)/(1-f^-N) where N6 and f = 1 + 0.049/12 = 1.004083333

For 80%, Payment on 86400 is £352.80, Payment on 21,600 is £646.40, Total £999.20 For 90%, Payment on 97200 is £396.90, Payment on 10,800 is £323.20, Total £720.10

Bruce

P.S. These are the same totals Ronald Raygun got by a) Calculating the repayments over 300 months (£625.08) b) Calculating the amount owed with 264 of 300 months still to go (£100877) c) Calculating how much extra £100877 is than 80% or 90% of the loan (£14477 or £3677) d) Calculating how much needs to be saved per month to have this extra after 36 months (£374.12 or £95.02) e) adding the 300 month repayment to the amount to save per month