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?
In: Other
Given that people have explained the math to you here’s why it’s mostly interest now:
1. Assuming your rate and period of repayment are fixed, You are going to be paying back X amount every month for Y years.
2. Early on in your mortgage, because of the amount you owe and the span of time over which you owe it, the amount of interest that you’re paying (Annual Interest rate * X) is more than the amount of principal you pay off per year. This is call ‘front loading’ the interest. As you pay off more and more of your mortgage, the amount of interest you pay relative to the principal becomes less even though your payment per month stays the same.
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