Mortgage intetest

dar100

Hi,

I got a mortgage a couple years ago, it's only small but I took it out over a long period, and at the time was best to fix.

I was just looking at my interest charged quarterly and it seems 4/5 of my monthly payments go to interest payments!! That's an awful lot

loyatemu

dar100 wrote: »

Hi,

I got a mortgage a couple years ago, it's only small but I took it out over a long period, and at the time was best to fix.

I was just looking at my interest charged quarterly and it seems 4/5 of my monthly payments go to interest payments!! That's an awful lot

That's normal - mortgage interest is front loaded. Each payment you make the proportion that's interest will decrease and the capital payment will increase. Towards the end of the mortgage you'll be mostly paying off capital.

DublinDilbert

dar100 wrote: »

Hi,

I got a mortgage a couple years ago, it's only small but I took it out over a long period, and at the time was best to fix.

I was just looking at my interest charged quarterly and it seems 4/5 of my monthly payments go to interest payments!! That's an awful lot

The longer the period of the mortgage the higher % of each payment goes on interest. If you get a very short mortgage only a small % of each payment goes on interest. This is how mortgages work, as the repayment for the most part is fixed, obviously subject to interest rate changes etc...

Were you hoping to have a very long mortgage and most of the repayments would be capital? Then it wouldn't be a long mortgage.

van_beano

It'll be around the 20 year mark of a 35 year mortgage before I start paying more capital than interest going by my current forecast.

dar100

Was just an observation more so, I understand the workings!! Il be over paying when I come off fixed. My interest rate is quite high at 5.20 percent

Denny_Crane

5.2 OUCH!!

Get paying it back early and don't be afraid to shop around.

dar100

Denny_Crane wrote: »

5.2 OUCH!!

Get paying it back early and don't be afraid to shop around.

Fixed for another 2.5 years, it's not a large monthly payment, but lots going in interest, soon as I can il overpay

dearg lady

loyatemu wrote: »

That's normal - mortgage interest is front loaded. Each payment you make the proportion that's interest will decrease and the capital payment will increase. Towards the end of the mortgage you'll be mostly paying off capital.

It's not front loaded, it's just higher at the start as you owe more then.

OP, you may already be doing this, but no harm to put money aside each month then when you're off the fixed rate you could make a lump sum payment

April 73

Is there a penalty to repay early? Would it be worth remortgaging with another provider? 5.2% is high.
Long mortgages make the monthly payments look attractive but the total amount of interest you repay is far, far greater than a mortgage even five years shorter.

jimmycrackcorm

Denny_Crane wrote: »

5.2 OUCH!!

Get paying it back early and don't be afraid to shop around.

I've been paying variable interest for 18 years and never fixed, I did miss out on change to a tracker but have never understood why anyone would fix their mortgage over those years.

dar100

Can't di anything until the fixed period is up, will be putting aside money as lump sum till then,

I fixed as at that time it offered security when it was a time when it looked interest rates could only go up!! A month or two later all the cuts happened

Grawns

I took a 5 year fixed at bank of Ireland on advice that mortgage rates were on their way up. The 5 years finished last January I think. Anyway what a mistake that was 5%.
Bank of Ireland allowed me to to over pay by €130 per month even though I had fixed. Worth checking with your bank.

Paul_Mc1988

What way does overpaying work to reduce the interest. Are your over payments coming off the capital then when the interest is calculated the capital is less hence reducing the interest you pay?

dar100

Grawns wrote: »

I took a 5 year fixed at bank of Ireland on advice that mortgage rates were on their way up. The 5 years finished last January I think. Anyway what a mistake that was 5%.
Bank of Ireland allowed me to to over pay by €130 per month even though I had fixed. Worth checking with your bank.

That's interesting, will look into it!!

AndyBoBandy

We went variable from the beginning as the plan was always to overpay, and we have been to the tune of about 800 per month.

We borrowed 165k over 20 years and 2 1/2 years in the capital amount has already reduced to 126k.

I called the bank up a few weeks ago and said I wanted a better rate as I was overpaying so much so they reduced my rate from 4.3% to 3.9% (>50% LTV), so now the standard monthly repayments have reduced by about 200 per month so now we are overpaying by 1,000 per month, so based on a rough calculation we should be free of mortgage debt in about 6 1/2 years.

Villa05

AndyBoBandy wrote:

I called the bank up a few weeks ago and said I wanted a better rate as I was overpaying so much so they reduced my rate from 4.3% to 3.9% (>50% LTV), so now the standard monthly repayments have reduced by about 200 per month so now we are overpaying by 1,000 per month, so based on a rough calculation we should be free of mortgage debt in about 6 1/2 years.

What bank was it Andy. My situation would be similar to yours

Earleybird

Paul_Mc1988 wrote: »

What way does overpaying work to reduce the interest. Are your over payments coming off the capital then when the interest is calculated the capital is less hence reducing the interest you pay?

Thats exactly it.

AndyBoBandy

Villa05 wrote: »

What bank was it Andy. My situation would be similar to yours

BOI

The only bank who aren't reducing rates for existing customers, so I called them up looking for a better option from them before I took my business elsewhere, and within the space of 2 minutes, my rate went from 4.3% to 3.9%.

I was actually a bit peeved off I didn't call them sooner.

stimpson

KBC allowed me to overpay up to 10% of the value of the mortgage while on a fixed rate. I can draw it down again whenever I like.

newacc2015

AndyBoBandy wrote: »

BOI

The only bank who aren't reducing rates for existing customers, so I called them up looking for a better option from them before I took my business elsewhere, and within the space of 2 minutes, my rate went from 4.3% to 3.9%.

I was actually a bit peeved off I didn't call them sooner.

You are still getting robbed though. AIB has variable mortgages for LTV less than 50% at 3.1% and KBC is offering 3% variable plus €2k to legal fees(although KBC often doesnt pass on interest rate cuts to existing customers).

If I were you, I would refinance. It is time consuming, but you will pay off your mortgage sooner.

bonkers.ie has a good break down of how much you can save

http://www.bonkers.ie/compare-mortgages/

cruhoortwunk

Good calculator for interest on a mortgage. Enter the amount and interest rate, then slide the term to see the difference in interest payments:
https://www.drcalculator.com/mortgage/ie/