How to calculate interest only tracker mortgage repayments?

T

trident

Registered User
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Hi, could someone supply the equation on how to work out monthly repayments for an interest only tracker mortgage?
Irish times today said that the 0.25% drop in ECB rate on a 100,000 tracker mortgage is equivalent to about 12 euro saving per month, but I calculated it as saving of about 20 euro per month.?
Tanks in advance
T
 
You are confusing two things here.

1) The interest on the mortgage
and
2) The repayment

On an interest only mortgage, both are the same.

But most mortgages are repayment mortgages and so the reduction in the repayment is different.
And to make it more complicated, the remaining term is also a factor.
 
The repayment on €100,000 over 20 years at 4% is 605.98

The repayment on €100,000 over 20 years at 4.25% is €619.23

So the difference in the repayment is €13.25

So the €12 a month is near enough.
 
trident said:
I got €20.83 as well, so I think the 13.25 is wrong?
Click to expand...

No, it's correct. It takes a bit of time to get your head around mortgage calculations and how mortgages are amortised and why when interest rates fall, the repayment does not fall by as much as the interest.

Check out this Key Post

Key Post - A guide to mortgage repayment calculations

As always, comments, corrections and suggestions for layout very welcome - Brendan There have been a few questions on askaboutmoney which have been very difficult to answer without explaining the background to mortgage calculations. For example: Bank of Scotland offer to write off my...
www.askaboutmoney.com
 
Yes, but my initial query was for an interest only mortgage ,, owing €100,000. When the interest rate reduces by 0.25% , I calculate that my repayments will reduce by approx 20 Euro. Is that correct?
 
trident said:
Irish times today said that the 0.25% drop in ECB rate on a 100,000 tracker mortgage is equivalent to about 12 euro saving per month
Click to expand...

The Irish Times is correct because they are assuming a repayment mortgage.

You are correct because you have an interest-only mortgage.
 
trident said:
Yes, but my initial query was for an interest only mortgage ,, owing €100,000. When the interest rate reduces by 0.25% , I calculate that my repayments will reduce by approx 20 Euro. Is that correct?
Click to expand...
Why are you on interest only?
 
Bronte said:
Why are you on interest only?
Click to expand...
Because it was cheap at the time! Bought in 2008, most of the time since repayments were very low. Thankfully rates are going in right direction again. Will use pension lump sum to pay of most of the loan.
 
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