Mortgage Value, how much is left after 3 years

apeking

Hi all,

Just have a question about my mortgage repayments, i am just wondering how i could calculate how much is left on my mortgage after 3 years,

I was using this calculator
http://www.absa.co.za/absacoza/content.jsp?VGN_C_ID=3eacf673f6ea1010VgnVCM100000ce17040aRCRD&VGN_CI_ID=28a81829e3ff0010VgnVCM100000ce17040aRCRD

it basically says i am paying off all the interest first really?

it says i will have only paid 6000 off the capital

is that how it happens?

My mortgage is for 290,000, 100% and 35 years and fixed rate for 1st year of 5.3%??

Paulw

That sounds about right. For the first few years, you are paying very little off the capital, and most on the interest.

apeking

So if i was to sell the house in 3 years for 290000 i would only receive 6000??

After paying nearly 50,000 in total??

Umm doesn't sound right

wyndham

290000 @ 5.3% for 1 year is over 15k, so it seems about right.
Its hard to say without seeing the paperwork.

patrickolee

Hmmm, I plugged your figures into the calculator you supplied and got 9292.27 paid off after 3 years. Are you sure you are using 290,000, 5.3%, 35 years?

apeking

Ye sorry i did it for 2 years when i did it,

still seems very steep.

Thanks all for the help

patrickolee

dont look at it as 6000, look at it as 2 years gone 33 to go.

Dalfiatach

patrickolee wrote: »

dont look at it as 6000, look at it as 2 years gone 33 to go.

Was that supposed to cheer him up? :eek:

On topic, don't they teach basic finance to the youngsters these days? Mortgages have all the interest front-loaded so you pay very little off the principal in the early years. Always been that way. In the last few years of the mortgage nearly all your monthly payments will come directly off the original loan amount.

Secondly, the Bank Manager Is Not Your Best Friend. Banks loan money out at interest in order to make a profit, not because they think you are a great guy. You borrow money, you have to pay it back plus interest. The longer the loan term, the more cumulative interest there will be. A 25 years mortgage will eventually cost you about twice what you originally borrowed - the original mortgage amount, and then the interest in total will add up to around the same again on top.

Thirdly, all the above only applies if you have a repayment mortgage. Lots and lots of people in recent years have taken out Interest Only (IO) mortgages. I get the impression that quite a few of them do not understand that they are not paying back any of the principal. Ever. And that in 35 years, the bank will come looking for their original €300K (or whatever) back in a lump sum.

iguana

It's not that the interest is front loaded exactly, but you are paying off the interest each year on the amount you owe. For example, if you borrow €100k at 5% over 25 years you will repay roughly €7095 a year. As 5% of €100k is €5k that means you have paid €2095k off your principle.

So in year 2 you owe €97,904. You will repay €7095 in year two, but because you owe less only €4895 is interest and €2200 is repayment, so by the end of the year your principle is down to €95,704. And so on. Each year less of what you re-pay is interest as each year you owe a little less so they charge you less interest.

ambro25

iguana wrote: »

It's not that the interest is front loaded exactly, but you are paying off the interest each year on the amount you owe. For example, if you borrow €100k at 5% over 25 years you will repay roughly €7095 a year. As 5% of €100k is €5k that means you have paid €2095k off your principle.

So in year 2 you owe €97,904. You will repay €7095 in year two, but because you owe less only €4895 is interest and €2200 is repayment, so by the end of the year your principle is down to €95,704. And so on. Each year less of what you re-pay is interest as each year you owe a little less so they charge you less interest.

QFT

OP (and every one else who will listen ), you need to look at 'One Account Mortgages' if you can find them over here.

Fastest way to repay a mortgage, short of a lottery-type unforeseen windfall - uses monthly interest calculation, wherein your principal is minused by your monthly pay/wage.

So on the €100k example above,
say you're on €5k a month, monthly interest calc on €95k only (-100+5)
end of month, pay off bills/food/etc (say €3k) = your principal now down to €98k and a bit (and a bit = interest offset) (-95-3 = -98)

next monthly pay/wage (5k) in month2,
now your interest calculated on €93k (-98+5)
... and so on and so forth

I paid off half of a £60k mortgage in 3 years with that system, if ever I buy again it'll only be with one of these puppies.

SkepticOne

ambro25 wrote: »

QFT

OP (and every one else who will listen ), you need to look at 'One Account Mortgages' if you can find them over here.

Look for offset mortgages or current account mortgages.