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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A slightly different angle:
The reason why your mortgage payment is mostly interest is because you pay the interest for the loan up front.
There’s a point, roughly halfway during the term of your loan where the principle and interest will be equal.
You’re paying the bank to have their money for the next 30 years.
This is why it’s so important to make extra payments especially during the first half of the loan.
You can shorten your term by 5-10 years, and drastically reduce the effective interest rate by giving them back their money early.
I wish this was taught in school.
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