We got our first year mortgage statement to find paying @£560 quid a month only paid off around 2k of the balance!. almost all of it went on the interest!. I thought it would have been 50/50 with capital and interest and cant find anywhere where it mentions this in my mortgage documents. Can I expect this ratio to change?
Did you bother to do any reading on the subject before you got the mortgage? Perhaps got a quote for an interest only mortgage? I`d strongly suggest you do read up on things before making such a big decision, rather than assuming anything.
As to your actual question - yes the ratio will change, of courise it will. This coming year you`ll be paying interest on a smaller sum of money, and will therefore pay more off the capital this year than last. The following year will see you paying interest on an even smaller capital sum, and so on until you`ve paid the mortgage off.
If you're paying slightly more than interest of course you will not may off much in the first years.
You can easily calculate your own amortisation table:
wrote
Did he explain what proportion of 1st year payments would be capital and interest?
If not, you *know* he didn't "explain it all"...
All you really need to know is that the amount you pay is worked out such that it'll pay off your mortgage over your selected term, assuming everything stays the same. If interest rates change, or you borrow more/make extra payments etc it'll be recalculated. In fact the lender will recalculate it every year anyway - but if things haven't changed the payment should stay the same.
In the early years you'll pay nearly all interest, in the later years it'll be nearly all capital. We can provide you with the maths if you really want.
We are planning to move next year and had hoped to have paid at least
5k of the capital off. Ill name the rip off mortgage company First National. Ill be going for a flexible mortgage text time so I can over pay every month.
Well save what you want to overpay in a high interest account and the difference in interest in this timeframe will be almost negligble c/w putting it in the mortgage. I'd hardly call the mortgage company a rip-off. They all work this way for repayment mortgages.
D.
The mortgage company isn`t a "rip-off", it is absolutely standard practise. If you over pay each month then you`ll find your mortgage going down a LOT faster, since every sigle penny of the overpayment is coming off the capital, meaning that you start paying less interest right away, so then each subsequent payment will be less interest, more capital.
Have a check on
As the saying goes, assume makes an ass out of u and me. 560 a month is a LOT of money to pay out, I know that I did a lot of reading round and research before I got my mortgage, so I knew myself what was going on. Do you trust everyone else you deal with on a daily basis implicitly? I certainly don`t, and I`d never trust everything a FA said unless I could back it up with my own, independent research.
I`d say learn from this experience - the next time you make a mistake like this by signing without understanding what is going on, it could be the equivilent of an endowment mortgage, or a mis-sold pension.
Yeah your're correct, next time I go for surgery I'll make sure I know more than the surgeon, after all I can't trust anyone.
Are you sure you can't overpay on your mortgage? Many non-flexible mortgages allow some degree of overpayment.
"Simon Finnigan" wrote
Nope - it'll save a little more in each successive year. For instance, it'll save around 0.13, 20 years later!
"Simon Finnigan" wrote
Make that more like nearly 2.40 interest saved, for the first 1 overpaid at the start.
"Simon Finnigan" wrote
True, but subsequent overpayments aren't quite as good - for instance, paying off an entire
100,000 mortgage at the start would *not* save 100,000 x 2.40 = 240,000 of interest."Simon Finnigan" wrote
But if it really *was* "equivalent to a missold pension or missold endowment", then it'd be well worth doing!
- If it turned out better than the alternative, you'd be "quids-in".
- If it turned out worse than the alternative, you'd get misselling compensation to increase the value back up to that of the alternative.
Heads you win, tails you don't lose!!
I`m not saying that you should know more than the person your dealing with, but you should at least have a grasp of the absolute basics, which you don`t seem to have going from your original post. If I went in for surgery, I wouldn`t learn more about the op that the person doing it, but i`d be sure to read up a bit and check that the info i`d been given regarding complications, alternatives, and ideally even the qualifications of the relevent surgeon where correct. Would you implicity trust a doctor who told you (to pick an extreme example) that due to your testicular cancer youre entire penis and testicles had to be removed, forever ruining your sex life? Or would you maybe do a bit of checking up as well, and maybe discover that (for example) aggressive radiotherapy is an option for you, which would leave you sterile, but have the same likelyhood of making you cancer free?
An extreme example yes, but surely it`s worth an hour on google? It seems that you`ve not even spent an hour independantly researching what is likely to prove the most expensive purchase of your life.
True, but considering the OP didn`t understand the basics I didn`t want to get into compounding figures. Plus I had a headache at the time I posted, which explains my appalling maths as above :-)
Again true, but still worth doing in a lot of cases (obviously each situation should be judged on its own merits)
In message , snipped-for-privacy@googlemail.com writes
Hmm, why them? Is there something iffy about your credit? They are usually expensive.
I think you probably will be able to with First National (but it will depend on your particular scheme)
With your attitude I'd suggest you get used having a lot of problems in your life.
This is what always happens in a repayment mortgage. Now that the capital is 2k lower, the interest will be that much lower and more of the money will go to repaying the capital. Eventually, pretty much all of your repayment will be capital.
I prefer
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