Interest rate on mortgage term

[TyroneSlothrop]

Hi All,


I have a 35 yr mortgage - taken out in feb. 2006 - for 333,000

After 135 months I have paid 58,000 leaving a currently outstanding bal. of 275,000
I have a tracker at the moment of ECB+2.25% and I pay 1250e per month..

By my calculation I have paid 430e off the loan per month since I took out the mortgage..[58,000/135=430 approx]
based on those calculations it will take me another 639 months to pay off the full mortage.

In other words - I do not know how much of a monthly vig PTSB take off me - but it
looks like [1250-430=] 820e per month...Is this correct?

nb. we were on interest only in for approx an 18 month period around 2011/2012 - could this have influenced the current monthly repayment ?

any clarity or advice much appreciated

 

[Joe_90]

The interest is highest at the start of the loan, so it is not correct to say that the capital element is €430 over the life of the loan. It changes every month the interest goes down and the capital element goes up.

A very rough summary below shows the decrease in the interest amount as the balance reduces.

O/S Interest
1.00 333,000.00 7,492.50
2.00 326,644.50 7,349.50
3.00 320,146.00 7,203.29
4.00 313,501.29 7,053.78
5.00 306,707.07 6,900.91
6.00 299,759.97 6,744.60
7.00 292,656.57 6,584.77
8.00 285,393.35 6,421.35
9.00 277,966.70 6,254.25
10.00 270,372.95 6,083.39
11.00 262,608.34 5,908.69
12.00 254,669.03 5,730.05
13.00 246,551.08 5,547.40
14.00 238,250.48 5,360.64
15.00 229,763.11 5,169.67
16.00 221,084.78 4,974.41
17.00 212,211.19 4,774.75
18.00 203,137.94 4,570.60
19.00 193,860.55 4,361.86
20.00 184,374.41 4,148.42
21.00 174,674.83 3,930.18
22.00 164,757.02 3,707.03
23.00 154,616.05 3,478.86
24.00 144,246.91 3,245.56
25.00 133,644.47 3,007.00
26.00 122,803.47 2,763.08
27.00 111,718.55 2,513.67
28.00 100,384.21 2,258.64
29.00 88,794.86 1,997.88
30.00 76,944.74 1,731.26
31.00 64,828.00 1,458.63
32.00 52,438.63 1,179.87
33.00 39,770.50 894.84
34.00 26,817.33 603.39
35.00 13,572.72 305.39

 

[TyroneSlothrop]

Thanks for that. I knew it was top-loaded somehow. I am fairly illiterate in these matters...and they matter a lot.
how is the monthly amount of capital+interest calculated?

thanks again

 

[dub_nerd]

Thanks for that. I knew it was top-loaded somehow. I am fairly illiterate in these matters...and they matter a lot.
how is the monthly amount of capital+interest calculated?

thanks again

You are right that it matters a lot! A mortgage is designed so that (assuming a constant rate of interest) you pay a constant monthly repayment and the balance ends up at zero at the end. While it looks like you are paying the same each month (which you are) the amount which goes to principal and interest changes continuously so that you pay mostly interest initially, and mostly principal toward the end. It is well worth your while understanding how this works, because you get to see the enormous difference that paying your mortgage down faster (or slower) can make to the overall amount of interest you pay. Someone posted a very instructive graphical mortgage calculator here recently which makes it all very easy to visualise. I'll see if I can dig out the link.

 

[Monbretia]

It has all been explained above but it's not really correct to think that the interest is top loaded as such, it's higher at the beginning because you owe the most, it's only as the capital starts to go down that the interest gets lower as obviously it's being calculated on a lower balance so that then more of your repayment is going towards capital.

 

[dub_nerd]

TyroneS, I'm pretty sure this is the mortgage calculator I was thinking of:

https://www.drcalculator.com/mortgage/

You can adjust the various sliders for your situation. It's a pity the red+blue interest/principal graph can't be shown as stacked instead of overlapping. What you need to visualise is that the red bit of any given repayment plus the blue bit add up to a constant -- that's why your payments stay the same throughout the mortage. But the interest (red) part of each payment gradually decreases, while the principal (blue) increases.

Also, try playing with the number of years of the mortgage term. Most people will just notice the payments increasing as you reduce the term. But look also at the total interest and total repayment as you change the term. The total interest is vastly higher for a longer mortgage term.

 

[Brendan Burgess]

I have set it out in this post

https://www.askaboutmoney.com/threads/a-guide-to-mortgage-repayment-calculations.152979/