I have a mortgage of £85,000 with £20,000ish paid off on a 30 year term (variable rate).
My initial monthly payment was around £330 per month but have been creeping up with interest rates, it’s now going up to almost £430 a month (£50 since the last rise two months ago). I just don’t understand how they can calculate this amount of difference in repayments..
Can anyone explain?!
I’ve been advised to ride with the repayment increases as it’s not a great time to remortgage, any other advice would be appreciated 🙏
In: 1
>I just don’t understand how they can calculate this amount of difference in repayments..
Amortization tables and calculators. U.K. is probably a little different, but in essence an amortization table shows the relationship between your total mortgage amount, your interest rate, your remaining principle amount, your loan length, and your monthly payment. Change any part, such as your interest rate, and the table can be rebuilt showing the effect of that change. If your interest rate goes up, the table will show how your payment is affected, based on how much longer you have on your loan and how much of the principle you’ve paid off.
Which leads me to a big piece of general advice. Overpay and make sure that your overpayment is applied to principle and is not applied to your next payment. Even small reductions in your principle can have a large effect on your length of payment, which in turn reduces the amount of interest you pay.
Find a good amortization calculator online and play with the numbers. Find out what happens if you overpay £50 per month, for example.
Latest Answers