Any Maths Boffins Out There? ......how To Calculate Mortgage?

[muchlovex]

I am no good at maths and my mortgage provider didn't know how to work this out as well. Can someone work this out for me please?

My mortgage is 125k, 107k is on the secured element and 18k is unsecured.
interest rate is 4.78

My current monthly payment is £541 per month.

I want to pay 4k off my mortgage and my mortgage provider said they will pay 2k on the unsecured and 2k off the secured element.

My question is, is what would my money payments reduce to please?

I appreciate any help given

[bednobs]

are you keeping the same term?

[aelmpvw]

i'd be worried if he was my mortgage provider

[muchlovex]

Yes, same term.

[muchlovex]

There are 20 years remaining

[echokilo]

I would be surprised if the interest rates are identical on both the secured and unsecured elements ... is this certain?

[muchlovex]

interest rates are definately indentical on both loans

[ubasses]

Is it interest only or repayment?

[muchlovex]

At the moment this is interest only. Once I get a full time job I will pay off the capital.

[Mojo-Jo-Jo]

Ok I divided 105000 by 100 then multipled the answer by 4.78
I did the same with 16000.
I then added the two numbers and divided it by 12 for the months.
I came up with £481.98 but I could be doing it wrong.

[ubasses]

£125000 x 4.78% = £5975 divide by 12 = £497. 92
So are you making overpayments? Has the loan been on a repayment basis in the past?

[muchlovex]

We've made large overpayments in the past. Yes, the 4k would be an overpayment.

With my mortgage we can overpay and if we would like to withdraw the money back in the future, we can. It's almost like a bank.

[muchlovex]

I meant to say it's almost like a bank account.

[Mojo-Jo-Jo]

I think my answer may be right now that I've seen Ubasses answer muchlovex

[muchlovex]

Thank you for all your help.

[New Judge]

I don’t quite understand the figures because the annual interest on £125k at 4.78% is £5,975 or £497.92 per month. This would suggest that your provider is charging you more overall than 4.78% and may be charging a higher rate on the unsecured part of your loan. If you are paying interest only then your overall rate is currently 5.19%.

However, putting that aside, I suppose a simple way to look at this (using the numbers you have provided) is that your loan is reducing by 4000/125000 which is 3.2%. So you might expect your monthly repayments to reduce by the same percentage. 3.2% of £541 which is £17.31, leaving £523.69.

[Gizmonster]

I'm in agreement with New Judge .... the figures def don't add up.
However, because the payments are interest only, I would expect that, as you would be reducing the outstanding capital by 3.2%, the interest (and therefore your payments) should reduce by the same amount.
If it was a repayment mortgage, involving the paying of interest AND capital, it would be a different ball game and alot more difficult to work out.
I take it, this is an offset account ?? We've got 1 and it's very handy. You can make payments into the account and the interest on your mortgage is adjusted accordingly, but you can draw the money back out if you need to.

[factor-fiction]

If it's an interest only mortgage with an overpayment facility you would find the payments don't reduce at all- all that will happen is that the capital outstanding will fall, the monthly interest payments due will fall slightly (by one twelfth of 4.78% of £4000 = £15.93 a month) and you will continue to pay £541 a month, thereby overpaying interest and this overpayment will further reduce the capital balance

[Gizmonster]

I think that there might be an option that you need to choose.
If you make an overpayment, there are 2 possible outcomes;
Your payments will reduce, as you will keep the original term of 20 years, OR;
Your payments will stay the same, but the mortgage will be paid off quicker, giving you a term of less than 20 years.
I could be wrong, but something is rattling around my head saying that we informed our bank of which option we wanted to kick in when me made an overpayment. I'm guessing if you don't inform them of your choice, there will be a default option that will kick in.