Changing interest rates on Dr Karl has me confused

Black_Knight

Frequent Poster
Messages
65
I've played around with Dr. Karl to plan out our mortgage repayments (as much as can be planned), and with the introduction of Avant I said i'd plug in their rates at the end of our fixed term mortgage.

Our current mortgage is about 240k @ 2.6% until the start of 2025, due to end in 2052 if we just tip away at the current interest rate. With what I feel are attainable overpayments, I've reduced the term down from 32 years to 16 years and 2 months according to Dr.Karl. All of that assumes a rate of 2.6% for the life of the mortgage. Without predicting the future i'm going to assume in 2025 I can get a rate of 2.1%, but when I plug this into Dr.Karl I get a term length of 18 years 3 months.

Is there something I'm missing here, or does Dr.Karl have a bug?
 

javaboy

New Member
Messages
5
Unless you adjusted your extra payments at the same time as the interest reduction, your mortgage payment is going to drop from around 1,571 to 1,352 p/m (assuming an overpayment of ~650p/m based on the figures above).

Mortgage amortisation means more of your payment goes towards the principal rather than interest later on in the mortgage and your overpayments only accelerate this.

By about 2033 90% of your payment is going towards the principal but since you're paying €219 less p/m after the interest rate change, you're actually repaying slower.

You are still going to save the guts of 2k in interest though.
 

Black_Knight

Frequent Poster
Messages
65
Thanks for that! You, Karl suggests 2k of savings in the end. Ill play around with it again tonight and see what happens if we maintain our existing planned repayments. ie. Same monthly outgoings regardless of any reduced rate.
 

Black_Knight

Frequent Poster
Messages
65
You do not need Dr Karl's calculator

Not sure I follow Brendan. I'm not looking to switch to Avant (or any provider given current rates), i'm just playing with theoretical mortgage rates when my current fixed rate expires (switching doesn't really make sense right now, over the remaining 4 years of my fixed mortgage i'd save ~3k with Avant, but between solicitor fees, valuations and breakage fee it'd only save a few hundred so i'm not bothered). While playing around I couldn't understand how a lower interest rate would result in a longer repayment time.
 

Brendan Burgess

Founder
Messages
41,452
Hi BK

If you read the thread it will explain that you should never look at the full term of the mortgage. It's just not relevant.

This might help


Brendan
 
Top