My monthly mortgage payment is GBP965. Of that, monthly interest varies from GBP714 to GBP770. The annual interest rate 5.64% and the remaining term is just under 27 years, five years fixed.
Clearly the interest is currently much more than 5.64%. What’s the calculation here?
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The 5.64% is an ANNUAL rate. Take your principal at the beginning of the year, take 5.64% of it, then divide by 12, and that’s about what you’ll pay in interest every month. Some back-of-the-envelope math says that you borrowed somewhere around GBP 165,000 ?
Every month, the principal goes down a little, so every month you pay a little less interest on that principal, and you pay a little more toward paying down that principal. Then, the next month the principal goes down by just a little bit more than it did the previous month.
If your mortgage allows it, you can speed this up by paying a little bit more every month. That’s a great way to knock years off your mortgage.
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