How is this possible - mortgage

[Mortgageh]

If I take out a mortgage of £200k over 35 years with an interest rate of 6%, my monthly payments would be £1250. This would mean I'm paying nearly £500k?!!

It's my first time doing something like this and I'm really confused so just wondering if anyone can explain this, thank you

and it is today. Key Stage 4 https://www.gov.uk/government/publications/national-curriculum-in-england-mathematics-programmes-of-study/national-curriculum-in-england-mathematics-programmes-of-study

Our first mortgage rate was 6.5% and the illustration clearly showed we would pay the capital back 2.5 times. That was enough to shock us into instantly overpaying even small amounts and to never borrow more ever again to move "up" the ladder (pay as much as you can off the mortgage before moving, even if it means no holidays for years!)

I don’t understand why this is such a surprise. You can run an Excel spreadsheet and see how it all adds up over the years.

I have taught maths for 15 years, and it is taught in Yr 8, Yr 9 and part of the GCSE and has been for the whole 15 years..........

There's some useful info here OP
https://www.moneysavingexpert.com/mortgages/

Wow! Not surprised though No point in buying till rates go back to 4% I reckon. Ideally lower

We've still got one, but I don't think they're very widely advertised these days.

This.

You pay 6% of the mortage every year.

so start with £200,000
year 1 interest £12,000
pay £1250 p/m = £15,000

so in year 1 you’ve paid off £2000 of your mortgage.

We had a mortgage like that to begin with and when the fixed rate ended we carried on paying the same amount which reduced the overall term and saved a lot of the interest we would have paid.

They still have offset mortgages, but the interest rates are extremely high in comparison to a standard fixed rate (e.g. 2% higher when we looked). We looked into it, but were much better off overpaying or even keeping extra money in isas and savings accounts and overpaying at the end of the term as could get better savings rates than our fixed mortgage.

This is sarcasm, right? I know there's no nuance online, and it's getting harder to tell, but I'm definitely right, yeah? Because the alternative is too depressing to contemplate tbh.

We didn’t earn a fortune, about 50-55k between us by the end of the mortgage both working full time so very average (below in fact I think). we managed to pay off a 35 year mortgage in 12 years and saved over £80k in interest by making regular overpayments that started small at £50 per month and then just kept increasing it as we got payrises. We just were very determined to pay it off. And before anyone asks, we had no help with a deposit or inheritance to put towards it.

We did the same as we were already used to that amount going out, and then combined it with regular overpayment

We ere paying 17% at one point - have had a mortgage almost constantly since 1984 (last one paid off earlier this year thankfully). 40 years of a mortgage!

Yes that’s sounds about right.
Its always best to get as big a deposit as possible and pay off lump sums as much as you can.
Make sure your mortgage allows you to do this

You’re right that they are much rarer now but I think we must have struck lucky because have an offset mortgage at 1.54%, fixed for two more years.

We’ve always had them and have been brilliant for massively overpaying.

It's probably worth saying I didn't over stretch when I bought, I bought very comfortably within my affordability (despite a pushy broker trying to encourage me to borrow more) so I can prioritise overpayment. Equally I'm prioritising overpayment over savings because I want my mortgage gone as quickly as possible, if I have a tough month I don't make the overpayment.

@JemimaTiggywinkles in the previous decade up to very recently mortgages have also been cheaper than rent. So If you keep paying the same amount (like we're doing) it doesn't seem like a separate pot of money iyswim.

Of course, it's not pocket change but as we were already paying it we just carried on. We have a bit more spare now because we're not pouring every penny into the deposit fund so it works out

Compound interest was in the maths curriculum when I was at school in 70s. Wonder when/why it was removed 🙄

Absolutely. There should be a basic maths test (not GCSE) which covers the number operations, weights and measures, percentages and compound interest. And everyone has to pass it, retaking it as many times as necessary

Most are capped at 10% if you're on a fixed rate, something to be mindful of if you get a windfall and want to throw it at the mortgage.

Our house was £80k. We paid 230k for it in total. Our interest rate was 8.45%. It’s worth just under a million now, 30 years later, so 230k seems like a bargain now!

I have a mortgage of £350k. 19 years left. I’m coming off my fixed rate next month which had payments of £795 per month. The standard variable rate I’m moving to is 9.99% so monthly payments of almost £3,000 per month.

The new stress tests indicate that if I look for a better deal on the open market, the total amount I could borrow is £200k! So I’d be stuck with my current lender on their best fix of about 6.54% with payments of £1950 per month. Plus £500 arrangement fee. I’m sure this isn’t an unusual situation.

Fun times.

Will people stop saying it’s compound interest 😂

not to mention that the house will very likely increase in price over 35 years.
obviously most people will move several times over that period but even given the most straightforward example, say it was worth £200k in 2023 and £300k in 2058 that's a 'free' £100k profit made which goes a good way to cancelling off the interest. Likely it would increase a lot more, look at house prices in 1988 compared to now (although I don't think we'll see AS significant jumps again, for a lot of people the equity will cancel out or even profit over the interest rate, particularly if rates go down again).