Advice about paying off mortgage early

[busybeeAAA]

Hi I've had repayment mortgage for 18 years and I've got 7 years left. The original sum was £90,000 and its now £36,000. I've noticed that in the beginning most of my repayments went on interest. In recent years I seem to be paying off mostly the capital borrowed. I've asked for a redemption figure as I'm thinking of paying it off early. But I expected the redemption figure to be less than the amount left (less than £36,000) because I've paid interest based on borrowing over 25 years. As I've only needed to borrow over 18 years, have I paid too much interest? I thought the £36,000 included some interest which now doesn't need to be paid. Can anyone explain to me how this works please? They want £36k plus £250 fee for paying early.

Doesn’t work how you think it does.

Your interest reduces as your balance reduces which is why over time your payment becomes more repayment than interest. But the capital sum is the capital sum. You can’t have paid too much interest because you paid what was due on the balance at the time.

You paying off early loses the bank money. It doesn’t save them anything.

www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/repayment-mortgages-explained-atwsx8v4sjhg

Ok thank you very much.

You pay interest based on the outstanding balance each year. It's nothing to do with the term of the mortgage.

So say your interest rate is 2 percent, first year you will have paid 2 percent of 90k in interest.

Now you're only paying 2 percent of 36k in interest, so more of your repayments go towards the capital.

So if you don't pay back early, you'll end up paying more than 36k, because you will pay an additional 2 percent on the outstanding balance each year. So you are saving money by paying it off!

On our mortgage the interest is added on the last day of each month - you see it in the annual statement. So the capital is the figure outstanding but on the 31st Jan for example £350 interest was added. Our £700 payment on the 1st Feb paid this interest off first then £350 off the capital. This means on the last working day in Feb the interest added will be based on the new capital figure (350 less than it was last month) so interest will be maybe £1 less

Your £250 will be an "early repayment charge".

Do you remortgage regularly OP? You should have a KFI document each time which will explain things and your broker should do

Thanks everyone for taking the time to reply :)

The £250 won’t necessarily be an early repayment charge. Unless it’s a fixed rate, then the fee would probably be higher. A fee of that nature is more likely to be a deeds release fee.

£250 seems really cheap. W3 do owe slightly more, but our early repayment fee is £3000+. Considering paying most of it, but leaving a nominal amount in to pay each month.