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Interest only mortgage ... a maths question for you

(10 Posts)
bibbitybobbityhat Thu 06-Oct-11 17:59:40

For the past four years or so dh and I have been paying interest only on our mortgage, which we originally set up as a standard repayment mortgage a few years before that. He was made redundant and started his own business, so we had to minimise our household expenses for a while.

Anyway, times are better now and we want to go back to proper repayment mode. I am trying to work out

a) how much we have underpaid in the past 4 years so that we can "catch up"

and

b) how much our monthly payments should be in full repayment mode now

Can anyone tell me how I work this out? I know how much is outstanding on the mortgage and I know our interest rate (5.63% horrific, I know, we are on a 5 year fix ffs)

can anyone clever tell me how to do the calculations?

Thanks so much

bluerodeo Thu 06-Oct-11 18:13:30

surely you should be contacting your mortgage provider?

bibbitybobbityhat Thu 06-Oct-11 18:17:36

They have told me they are would charge £20 for the privilege of working out the shortfall.

bluerodeo Thu 06-Oct-11 18:18:32

bastards

said Thu 06-Oct-11 18:19:43

do you not get an annual mortgage statement telling you the balance?

bibbitybobbityhat Thu 06-Oct-11 18:21:28

said
yes, got it in front of me.

said Thu 06-Oct-11 18:25:14

OK <Trying to remember why I asked that>

Erm, if you put the balance into a mortgage payment calculator thing with the years as though you were back when you switched to repayment, and then put in the interest rate will that tell you what your monthly payments would be? Then, deduct what you have been paying per month? Times that by number of months not paying loan bit and that will equal what you need to pay to catch up?

Itsjustafleshwound Thu 06-Oct-11 18:25:21

Surely, if you are talking about a repayment mortgage in simple terms it would be your loan amount divided by term of the loan (yearly repayment amount).

e.g. loan of £100,000 for 18 years : repayment of approx £5,555 per year?

<<I am aware that the interest would be worked out on the diminishing rate, but then with a fixed rate repayment mortgage the amount stays the same>>

As you can tell, maths was my nemesis

bibbitybobbityhat Thu 06-Oct-11 20:24:10

Thanks all. Have done the sums on moneysavingexpert.com's mortgage calculator. We owe £185,000ish over 20 years max (dh main breadwinner is 47) and at 5.63% that equals almost £1300 per month. Eeeeeeek. And I just know, when we can get out of this fixed rate deal in 18 months time, interest rates will start rising again.

And all this for a very shabby 3 bed terrace.

sad.

We've gone wrong somewhere down the line.

CogitoErgoSometimes Fri 07-Oct-11 06:53:42

What are the penalties for early redemption? My 5 year fixed rate, for example, penalises me on a sliding scale - high penalty for Year 1, less for Year 2 etc. so if you've only got 18 months to go, it could be that the penalty is relatively small. If you could remortgage with a different lender and take the penalty into account when doing the calculations, you may find you can save money in the long-term. Some lenders will also allow you to overpay a % of the balance without penalty - don't know if you're in a position to do that.

If it's any consolation, if you only took out your repayment mortgage 4 years ago, the amount of capital you would have paid off by now would have been relatively small. If it was originally £185k over 25 years @ 5.63% the capital repayment each month would have been around £300. So you're only about £14k-15k adrift.

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