First year of repayment mortgage, WTF!

It's extraordinary that after all that you still entertained the foolish notion that you'd be paying 50/50 interest/capital. The whole idea of the way standard repayment plans work is that you pay interest on the amount you owe, plus a bit to reduce the balance, and that the amount you pay each month, being the sum of those two, stays the same throughout the life of the mortgage (assuming no interest rate changes or overpayments or re-borrowings). It is an unavoidable consequence of this that you pay off less in the early years than in the later years.

For it to be anyone's fault there must be something wrong, but there is nothing wrong so it's no-one's fault!

It would be worth looking into whether, instead of overpaying, they would let you change the term of the mortgage. If it was originally for 25 years, and the end date is 2029, then ask about bringing it forward to say 2024. This will automatically increase the monthly payments, and so will have the same effect as overpaying regularly but might not be counted as "overpayments" by the lender.

Do your sums. Unless the new mortgage you move to has an interest rate at least 1% lower than your current one, you might be better off just waiting another year instead of paying this early exit penalty.

You can't find anywhere it says this? Doesn't it tell you what the interest rate is? From that you could easily work out how much you would be paying each month if you were paying interest only. As a good first approximation, if you multiplied the difference, between that and what you're actually paying each month, by 12 you'd get what you're paying off during the year.

Let me pluck some figures out of the air which I guess to be in the right ball-park.

Say you borrowed £96k at 5%, which at interest-only would be £4800 a year, or £400 a month. A repayment over 25 years for the same parameters would cost £6811 a year or £568 a month. £6811-£4800 is about £2k. See?

Go to something like

There is no split. You don't pay some interest and some capital. You borrow, get charged interest and make repayments continuously until the debt is cleared.

All that is happening is you are reducing your debt at a faster rate.

Of course there is, though it isn't usually made explicit to you in advance, and of course the split isn't constant. You usually get an annual statement which details how much interest you've been charged during the past year and how much capital you've paid off.

That's rubbish. You pay a fixed amount each month, and some of each payment is interest on what you owed during the last month, and the rest reduces what you owe.

You are wrong. It doesn't say how much "capital" you have paid it says how much you have paid.

I disagree. You are talking rubbish. It is exactly as I set oiut.

Have you been taking pedantry lessons from Tim?

It may not explicitly say how much capital you've paid off. But:

If it says how much you've paid, and how much interest has been charged, then the difference is how much capital you've paid off.

Also, it will say what your balance outstanding is at the end of the year. It will also say what your balance was at the start of the year. Except inasmuch as the balance is contributed to by interest on interest not paid when due, all of it will be capital. The difference between the start and end balances, therefore, is how much capital you've paid off.

"Ronald Raygun" wrote

I don't think Peter would take lessons from anyone, least of all me!

Why? Using your logic you could be paying off the capital and owing the interest.

The situation is still as I have stated.

No. It's how much the balance has reduced. If you don't pay anything in a year what is the figure brought forward to the next year? Is it partly capital and partly interest or is it the amount outstanding?

I don't know of any mortgage lender who keeps track of what is outstanding split by interest and capital.

I would take lessons and I have taken lesson and I'd be willing to again - but you are right about the "least of all" bit!

No, you're talking rubbish.

Generally the balance *is* all capital, if you've been paying all the interest when due.

Both. It is the amount outstanding, which *is* partly capital and partly interest. The distinction is too unimportant to bother splitting into two explicit chunks because you can think of unpaid interest as being added to the capital in the same way a further advance would be: You're just borrowing more on the mortgage to pay the interest due on it!

I didn't say there was, but some of them get close, because their rules let you borrow back capital already repaid. To make this possible, that is to say to make it possible to know what your re-borrowing limit is, they actually tell you on the statement what your "available reserve", or whatever they call it, is. Generally this is simply equal to the difference between your original amount borrowed and your current balance outstanding.

I suspect you're merely taking exception to the word "capital". What we are (well, I am, at any rate) really talking about is paying down a *debt* which is initially equal to the capital sum borrowed, and which normally shrinks with each payment by the excess of that payment over the interest charged for that period (which in turn is equal to the debt outstanding during that period multiplied by the interest rate for that period).

But where there are irregularities the debt can fluctuate. If a payment is missed, the debt grows by the amount of the interest component of that payment, yet you might not like to think of it as the *capital* having grown. The distinction is immaterial.

I've explained the situation perfectly adequately. I don't agree with your logic and I don't know anyone who does other than you.

"Peter Saxton" wrote

You've said that some of RR's points are "rubbish", when they are actually perfectly *valid*, but you certainly haven't "explained the situation perfectly adequately."

"Peter Saxton" wrote

I agree with RR. Now you can say that you

Which did I say were rubbish when they were perfectly valid?

I do know someone who agrees with him. Seeing as it's you I'm even more certain of my case! Ronald, remember, this is the guy who said an acronym didn't have to be derived from a list of words!

Explain what is wrong with:

"There is no split. You don't pay some interest and some capital. You borrow, get charged interest and make repayments continuously until the debt is cleared."

"Peter Saxton" wrote

"Peter Saxton" wrote

RR's already explained it to you. Of course part of what you pay back is capital, and part of it is interest. If it's not "some interest and some capital", then what do *you* think it is?

"Peter Saxton" wrote

That bit's OK.

I noticed you didn't answer my following question:

Explain what is wrong with:

"There is no split. You don't pay some interest and some capital. You borrow, get charged interest and make repayments continuously until the debt is cleared."

Are you able to answer it now? If not, why not?

You're making a payment that reduces the debt.

So you said: "*All* the ones that you said were rubbish ... !!" yet you also said: "That bit's OK."

You're contradicting yourself.