Mortgage: interest/capital
Discussion
OK, out of interest, If you were to pay, say £500 of mortgage a month, how much would actually pay off the equity of the house and how much is paying the bank it's interest?
for example, 90k house, 81k mortgage, 5% rate, 25 year mortgage.
Would the ratios be the same in year 1 compared to year 4?
THanks
for example, 90k house, 81k mortgage, 5% rate, 25 year mortgage.
Would the ratios be the same in year 1 compared to year 4?
THanks
In the early years of the mortgage you are paying mostly interest with a little bit of capital.
Over the life of the mortgage this changes until towards the end of the loan you are paying mainly capital and a little interest.
The ratios in year 1 & 4 wouldn't be greatly different, but there would have been some change.
Over the life of the mortgage this changes until towards the end of the loan you are paying mainly capital and a little interest.
The ratios in year 1 & 4 wouldn't be greatly different, but there would have been some change.
On the numbers you mention the repayment amount is £473.52 per month. This is made up of £337.50 in interest payment (0.05 * 81000 / 12) and £136.02 of capital repayment.
As your mortgage payment stays the same, but you are paying down the amount you owe, the capital repayment portion will increase each year and the interest portion will decrease.
Read up about the PMT function in Excel.
As your mortgage payment stays the same, but you are paying down the amount you owe, the capital repayment portion will increase each year and the interest portion will decrease.
Read up about the PMT function in Excel.
marctwo said:
On the numbers you mention the repayment amount is £473.52 per month. This is made up of £337.50 in interest payment (0.05 * 81000 / 12) and £136.02 of capital repayment.
As your mortgage payment stays the same, but you are paying down the amount you owe, the capital repayment portion will increase each year and the interest portion will decrease.
Read up about the PMT function in Excel.
Close!As your mortgage payment stays the same, but you are paying down the amount you owe, the capital repayment portion will increase each year and the interest portion will decrease.
Read up about the PMT function in Excel.
If 5% is the annual rate, and the mortgage payments are monthly, then the monthly effective interest rate is 0.41% and the monthly payment is £468.29.
The first payment therefore consists of £330.00 interest and £138.29 capital repayment.
After 4 years, the 49th payment consists of £300.20 interest and £168.09 capital repayment.
After 10 years, the 121st payment consists of £243.04 interest and £225.26 capital repayment.
After 20 years, the 241st payment consists of £101.37 interest and £366.92 capital repayment.
The final payment consist of £1.90 interest and £466.39 capital repayment.
Hope this helps!
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