Reductuction in Mortgage Repayments over the years?

[PeterDublin]

Hi All,

I would be grateful for clarification on the following. I'm currently on year 1 of a tracker mortgage and have another 30 years left.

I thought that my monthly mortgage repayments would reduce over the years, assuming that the current ECB rate remains the same for the forseeable future.

As I pay off capital and interest, I thought that every 1 to 2 years that my mortgage repayments would reduce slightly since I have paid off a certain amount of capital.

However, my bank just advised me that it could take up to 9 years before I start paying less each month.

Any clarification on the above would be much appreciated!

Thanks

 

[Neg Covenant]

Your repayments should remain constant for the duration of the loan if the interest rate does not change.

The split of the repayment between interest and capital repayments will change over time. Interest is front-loaded. Therefore, more of the money goes towards interest to start with but this changes gradually over the years.

There are many "amortization schedule" spreadsheets that you can download on the internet. I recently got one form Microsoft to judge my own mortgage. (It would only accept a maximum term of 30 years. They obviously haven't heard about our bubblicious 35 and 40 year mortgages!)

Changes in interest rates complicates things but the schedule will give you an idea of where you are going. BTW - how did you get a tracker last year???

 

[Towger]

Also, In real terms your mortage will stay at the same level (bar interest changes), but with inflation, job advancement etc your take home pay will increase. That it why you may hear that so and so has a mortage of only 100 a month, but the reality is that 20 years ago that 100 a month was 30% of their net monthly pay.

 

[PeterDublin]

Thanks for replies. I will check out those schedules. I was under the (albeit wrong) impression that in 10 years time, my monthly mortgage repayments would have decreased by 33%. To me, the logic should be that as you pay off your capital, your repayments will go down.

I got a tracker mortgage, as I recently reverted to it at the end of my fixed rate period (as per loan offer).

 

[BazFitz]

Thanks for replies. I will check out those schedules. I was under the (albeit wrong) impression that in 10 years time, my monthly mortgage repayments would have decreased by 33%. To me, the logic should be that as you pay off your capital, your repayments will go down.

I got a tracker mortgage, as I recently reverted to it at the end of my fixed rate period (as per loan offer).

No - If the ECB rate doesn't change, your monthly repayment won't change for the duration of the loan.

 

[huskerdu]

Thanks for replies. I will check out those schedules. I was under the (albeit wrong) impression that in 10 years time, my monthly mortgage repayments would have decreased by 33%. To me, the logic should be that as you pay off your capital, your repayments will go down.

I got a tracker mortgage, as I recently reverted to it at the end of my fixed rate period (as per loan offer).

No, the interest you pay each year goes down, and the amount of the capital you pay goes up so that the annual payment is the same each year.

If they did as you suggest, the amount of time to pay off the mortgage would be much longer and the amount of interest that you would pay overall would be much higher.