Mortgage Balance Calculation

Arddon

Can someone please explain mortgages - the interest, the repayments & how a mortgage decreases annually?

Take this example, and advise if I am correct:

€241,000 is the remaining balance, as at 23/1
Current Interest Rate is 2.3%
Current Repayments are €952 per month
So over 12 months I pay €11,424 to bank

Is the interest paid, 2.3% of the balance (241k) = €5543 for the year
Or is interest paid calculated every month based on a decreasing balance?
And then is the amount paid of the capital €11,424 - Interest paid over the year?
What I am interested in is how the remaining balance figure is calculated?

Hope this makes sense

thanks for any help

physioman

Arddon wrote: »

Can someone please explain mortgages - the interest, the repayments & how a mortgage decreases annually?

Take this example, and advise if I am correct:

€241,000 is the remaining balance, as at 23/1
Current Interest Rate is 2.3%
Current Repayments are €952 per month
So over 12 months I pay €11,424 to bankY

Is the interest paid, 2.3% of the balance (241k) = €5543 for the year
Or is interest paid calculated every month based on a decreasing balance?
And then is the amount paid of the capital €11,424 - Interest paid over the year?
What I am interested in is how the remaining balance figure is calculated?

Hope this makes sense

thanks for any help

Download karls mortgage calculator from google play store. It provides tables that explain the calculations. An excellent resource

Arddon

thanks for the reply physioman, but you've just created a whole new thread in the technology section...

...it looks like a nice piece of kit though

Arddon

there is actually an online one aswell - many thanks

the numbers are not exactly the same - maybe due to banks/tax relief??

coylemj

An APR of 2.3% represents a monthly rate of 0.189675%. You obtain this by getting the twelfth root of 1.023 which is 1.00189675.

At the end of each month, do the following ......

1. Apply (add) interest of 0.189675% to the balance at the end of the previous month.

2. Deduct your payment of €952, this give you the new balance.

By my calculations, your outstanding balance won't go below €200,000 until July 2022 using those numbers. As you say, you are paying €11,424 p.a. but your interest bill for 2016 will be €5,423 (less than your suggested €5,543 because the balance is reducing) so you will only reduce the balance by €6,000 in the year 2016.