Tracker Mortgage question

nigeloconnor

I have a tracker mortgage and have 204k left to pay.. I have had the mortgage for 4.5 years now and am currently paying 1117 a month at 0.86% + the tracker rate.. I took it out over 30 year period..

If the ECB rate is cut by 0.5% this Thursday and if I maintained the payment of 1117 against the mortgage (even though the repayments required will be less) how much time would I take off the mortgage?

I am useless at this type of thing and just interesed to know the calculation.. I was thinking if the interest rates are low would it be better to try and pay off more of the mortgage????

Thanks in advance.

homer911

I make that a reduction of 28 months (but I could be wrong..)

nigeloconnor

Do you mind me asking how you calculated that?

dotsman

Ok, firstly, for that amount, rate and term, you should only be paying 1135 approx. However, I assume that the figures you have given above were rounded so that would explain the slight difference.

Using this mortgage calculator,

I first put in the figures:

• Amount = 204,000
• Term = 25.5
• Rate = 4.61

and hit "Calculate" which gives me a repay of 1134.72 and "Paid-off" date of May 2034.

Next, I change the rate from 4.61 to 4.11 (the 0.5% reduction), and recalculate to give me a figure of 1076.99. By subtracting this from the original 1134.72, this means you will be overpaying 57.01 every month.

Now, keeping the above figures in the calculator (with the rate at 4.11), I enter the 57.01 figure into the first box (monthly) in the Extra Repayments section and again hit the "Calculate" button. This gives you a "Paid-off " date of April 2032. Thus, a savings of 2 years and 1 month.

Obviously, by providing the precise figures, you will get a more accurate result.

Feel free to hit the "Show/Recalculate Amortization Table" button to show the repayments in detail.

One thing you should note is that, you can expect interest rates to bob around a lot over the next few years (mainly down at first!). Even if the ECB cut the rate by 0.5% as predicted, they are more likely to make several more cuts next year and keep rates very low until the european economies get out of recession (the silver lining to our current financial mess:D). All this will mean is that if you keep you repayments the same even after all these cuts, then you can really expect to see the term being reduced dramatically

nigeloconnor

Thanks dotsman.. great info to have..

Think I will leave my repayments at the current amount.. If I am still alive in 25 years I will be glad of it..:D