velohead66

Just got my annual statement (after year 1), and see to my horror on a mortgage of $340,000 I've paid $28,000 but the balance has gone down $5,000

Mortgage is repayment, figures are approx $.

We all know a small increase in repayments will knock of a few years or more off the total term.

OK - how do I reduce the term big time ???
There must be some clever tricks out there, surely

Dunk

iTrader: (1)

Pay more, borrow less, reduce int rate, rob bank.

D

mr & mrs carlos uk300

$340000 mortgage.

PCatWork

If that's NZ $, it isn' t that big compared to the equivalent value in the UK.

In answer to the original question, monthly overpayment is the most straightforward way to reduce the term.

mr & mrs carlos uk300

Whooooooo i see.

Brendan Hughes

ISTR your first few years' payments are mainly interest. Later, they are mainly capital. So it's normal that the balance hasn't gone down much.

Mine's 320k. I pay 1.5k p/m, and after 18 mths balance now shows 308k. Bit better than yours, but not much.

Other than getting a current account mortgage ("reduces" the interest you pay), not much I can add to the above posts.

jasey

To increase speed (and risk) reverse this list

speedking

It's because your payments are levelled out over the term (25 years?).

$340k + interest at 7% = $364k - $28k = $336k
balance has reduced $4k

near the end of the term when say $50k outstanding

$50k + interest at 7% = $53k - $28k = $25k
balance has reduced $25k

Not precise but hope this illustrates the point.

Some of your loan you are paying interest on for 25 years. Overpay and see if you can reduce the term in say 5 years time could make significant savings if your lender is flexible.

HTH.

PCatWork

Seems a bit cheap, Brendan - mind if I ask what rate you are on?

(I pay £1,200 pcm for £210k initial advance, fixed rate of 4.95%)

Brendan Hughes

Dunno, but it's Euro rate remember; I think it's ITRO 3%. Here no-one talks about the final rate, they talk about the "spread", which is a bit of a misnomer, it's more the "addition" - you try to get the minimum added on top of the 6mth average Euribor rate. My spread is 0.45%, which is pretty damn low - most seem to be 0.8 - 1%. TBH I don't know and don't really care - Portuguese banks don't offer the same flexibility as UK ones, almost impossible to change lenders without heavy penalties, so I just know it was good when I got it and that's that.

jasey

Can you translate that to Engerlish please ???

Brendan Hughes

Sure. "You're in Scotland so don't bother reading this, it won't help you."

PCatWork

OIC.

For some reason I thought you had moved back to Blighty.

Wanna do a rate swap?

Brendan Hughes

You'll know when I move back, my posts will take on a morose tone and start blaming all the useless foreigners who live near me and don't do a decent day's work. Not like at present

Rate swap - give it 3 years, and very probably

velohead66

I guess keep interest rate as low as poss.
Overpay if possible.

I pay 6.80% (fixed for another year).
Floating is near 8.0%, maybe nearer to 7.95%

Of course in NZ, you earn less $ too,
so in real terms it's not that cheap.
Oooh, the joys of a GBP salary !!!


Bank has half stiched me up.
Turns out the life insurance I was paying (as a mortgage condition) is no longer a requiremnt.
That means potential capital repayments have been wasted.
Cancelled it today.


So, no fiendishly clever schemes out there ???
Not even one ???

vindaloo

Maximise your use of the fixed rate period. Pay as much as you can now. If you can afford to pay double, then you're effectively doubling the 'discount' offered by the disparity of the fixed and variable rates.

Other option is a lump sum payment. If that's not allowed just whack up the monthly payment.

J.

velohead66

Yes, made a lump sum payment as well.
Hopefully first of many.

Thanks for the advice to all.