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
Let’s simplify to make it easy to understand.
Interest rates are 6%, and your Mortgage is $100. You make $24 / year, or $2 / month .
Interest is usually compounded monthly, which means you owe an additional 0.5% per month, or $0.50. You can only afford to pay 40% of your take-home pay on housing, so you pay $0.60, and have effectively paid 10 cents off your mortgage, and 50 cents in interest.
Just like that.
That said, when you have paid half of your mortgage off, you only owe $50, and interest is just $0.25 / month. You are still paying 60 cents, but now 35 cents is going to principal, and 25c interest. Your LAST payment will be almost all principal, obviously
Latest Answers