Query about mortgage statement and payments

Hi there,

I was wondering if someone can help me. I am currently on a tracker rate of 1.8% (and I feel verrrrry lucky to have it!) I went on to this rate in 09 after a fixed term ended. I got my mortgage statement for 2010 yesterday and I don't really understand how it works. Each month the amount gone off the capital appears to be different, and its all different figures, not automatically increasing or decreasing. Well my main query is, last year I paid in the region of 8k off the initial loan amount. Provided the tracker rate stays the same, will I end up paying the same amount off the capital next year, or should this increase as the loan amount decreases. I am aiming to be able to move house in 5 years and I would like to know a ball park of what I will have to have saved. If I pay 8k off the capital for 4 years I'll have paid of 32,000 (which is nothing in the grand scheme of my mortgage ) but just wondering, is this how it works? I'm totally clueless when it comes to this!

Thanks for taking the time to read

Hi Daisy

Each month you make a payment to your mortgage which comprises both a re-payment of the capital amount borrowed and an interest payment.

Each month, your total payment is deducted from the total capital amount borrowed and, at month end, the amount of interest on the outstanding balance is credited back onto the loan.

Each month that goes by, the amount of your interest payment goes down slightly (presuming the interest rate stays constant) and the amount of the payment towards the capital goes up slilghtly. In the initial years you are paying off more interest, and this gradually goes down.

You'll also find that the amount of interest varies each month depending on whether there are 30 or 31 days in the month.

If you paid back €8K in 2010, you'll pay back more than €8K from the capital amount borrowed in 2011. There are some good mortgage calculators, like Karl Jeacle's, online that will provide illustrations of how your outstanding balance will go down each year.

Thanks a million for taking the time to reply. I tried Karl Jeacles on line mortgage calculator but I couldn't get any info to see what I might pay off the capital next year (I'm obviously going wrong somewhere) it told me how much interest I will pay at 1.8% over the term of the mortgage. But good to hear anyway that as each year goes on I'll be paying a bit more off the capital!

Hi Daisy

If you do the Karl Jeacle calculator (and I have to use his 'old calculator', can't manage to work his newer version on my browser), when you've put in your total amount borrowed, start date for the loan, interest rate, etc, it produces a graph showing the interest vs capital amount and how they change over the duration of the loan.

Underneath the graph there are a number of buttons, which will show you the amount your loan will decrease each year, the total amount of interest paid over the duration (assuming your interest rate stays unchanged), etc.

You can also click a button for how much the capital amount will decrease on a monthly basis, and use the slider to set it for each year. It should give you an approximate idea of how much capital you'll pay back in 2011, 2012, etc.

Best, Molly