What should I pay on my mortgage to drive down the balance.

mactheknife19

Trying to understand what is the quickest way to pay down a portion of my mortgage . Here is the proposed scenario

I have a mortgage of 290k. I'm paying 2300 pm o/w 900 is principal. So over a 2 years I would knock 36k of my mortgage. Therefore I still 254k. So approx 40% of my current payment in principal.

So could I go to my bank and say I want (or make an excuse of can ) to make payments of 1000 for a period of 3 years which would that equate to 14,400 (400 x 36 ) paid of my principal, and if I saved the 1300 each month for the 3 years I would save 46800, which when added to 14400 is approx 61k, thus leaving me with a balance of 230k.

Can someone tell me is there a flaw in this analysis.

Oral Surgeon

mactheknife19 wrote: »

Trying to understand what is the quickest way to pay down a portion of my mortgage . Here is the proposed scenario

I have a mortgage of 290k. I'm paying 2300 pm o/w 900 is principal. So over a 2 years I would knock 36k of my mortgage. Therefore I still 254k. So approx 40% of my current payment in principal.

So could I go to my bank and say I want (or make an excuse of can ) to make payments of 1000 for a period of 3 years which would that equate to 14,400 (400 x 36 ) paid of my principal, and if I saved the 1300 each month for the 3 years I would save 46800, which when added to 14400 is approx 61k, thus leaving me with a balance of 230k.

Can someone tell me is there a flaw in this analysis.

Yes, the flaw is the bank will make less money and therefore wil not agree to it.
Why not pay them nothing and save the 290k and give it to them in 20 years time??

That extra interest is the payment for giving you the loan and man do they want it....

Good luck,
OS

mactheknife19

OS, yeah I can see your point if you talk about over 20 years. But lets say you did come to a short term agreement ( as people are today when they are in arrears for example ), is there something I'm missing in my calculation.
So for example the 1000 I offer to pay, would that be all interest, hence I'm not knocking off the 40%.

Oral Surgeon

mactheknife19 wrote: »

OS, yeah I can see your point if you talk about over 20 years. But lets say you did come to a short term agreement ( as people are today when they are in arrears for example ), is there something I'm missing in my calculation.
So for example the 1000 I offer to pay, would that be all interest, hence I'm not knocking off the 40%.

I'm no expert in this area but if you have €1300 per month to save, then you are capable of paying your mortgage and therefore do not qualify for an interest only option...
If you are seen to be capable to pay- they want the full amount. They only look at other options when you are in trouble financially, unfortunitly...

All the best,
Seamus

phormium

The interest per month will not change just because you reduce the monthly repayment. If I understand you correctly 900 p.m. is the capital amount, 1,400 the interest portion? If this is correct then the 1,400 p.m. is going to continue to be the interest amount and if you only pay 1,000 (if they were to agree) then your debt would rise by 400 each month.

Interest is like rent on money, it continues to be charged even if you don't pay the correct amount each month.

Panrich

If you are paying €900 per month off the principal then in 2 years you will pay off €900x24= €21,600. Where are you getting €36,000 from?

mactheknife19

meant to say 3 years ( 36 months), I know that would be 32400, but I just rounded it up to 1000 per month as I would have thought the ratio would move it up over that period.

Oral Surgeon

mactheknife19 wrote: »

but I just rounded it up

Brilliant, explain that to the bank,

Eh, what about the €3600 deficit??

Ah see I rounded the figures to make the calculation a little easier....

mactheknife19

ok, so the Principal is 1000, not 900 for the pedantic among you, I think the question was answered by Phormuim anyway.
Jog On

Oral Surgeon

mactheknife19 wrote: »

ok, so the Principal is 1000, not 900 for the pedantic among you, I think the question was answered by Phormuim anyway.
Jog On

Lighten up man;)

NIMAN

I spoke to the bank myself about this a few years back.

If you are on a Standard Variable mortgage you can make overpayments at any time, although they prefer it if you did it in bigger lumps rather than loads of small payments (something to do with interest having to be calculated manually etc).

So you could save maybe €5k, give it to them and either have the choice of:
1) taking €5k off your capital, and maintain your monthly repayments, which will have the effect of taking time of your mortgage term, or
2) taking €5k off your capital, and keep your term the same, which will have the effect of reducing your monthly repayments.

cookie1977

I make extra payments into both my fixed and variable rate mortgages periodically from my 24 hr online banking account. Anything from 2 to 3 digit sums. Never had any problems. It's an AIB account into 2 ICS mortgages