Mortgage repayments on a capital and interest mortgage ?

[_Chris_ 10]

If you have a straight repayment mortgage, where you pay off the capital and interest with the mortgage, assuming that the interest rates were exactly the same all the way though the mortgage term, wouldn't the mortgage payments gradually go down, as you start to owe less ?

[andrejuan 10]

If you have a straight repayment mortgage, where you pay off the capital and interest with the mortgage, assuming that the interest rates were exactly the same all the way though the mortgage term, wouldn't the mortgage payments gradually go down, as you start to owe less ?

 

Yes, but it would take forever to pay it off, what happens is, the proportion of interest gets less as time goes on so more is paid off the capital. At first nearly all your payment goes on interest, towards the end it is nearly all going to pay off the debt.

[jjbarnesfan 10]

There are 2 different methods of calculating mortgage repayments. The gross profile method and the constant nett repayment. If you google them it will explain better than I can on here.

What you should also take into account is that some lenders work out your capital and interest payments on a daily basis and others on annual basis which will also affect amount payable.

 

With either method, the mortgage will be paid off at the end of your chosen mortgage term

[_Chris_ 10]

Thanks to you both for the answers. It's just that a neighbour has completed 14 years of a 20 year mortgage and his monthly mortgage payments always seem to be the same as they was when they first started the mortgage, give or take slight deviations due to interest rates.

[cgksheff 44]

......... It's just that a neighbour has completed 14 years of a 20 year mortgage and his monthly mortgage payments always seem to be the same as they was when they first started the mortgage, give or take slight deviations due to interest rates.

 

Which is how the mortgage was designed.

 

Variation in what/whose interest rates?

 

If the lender's interest rates go down the mortgage will be redeemed in less than 20 years, and longer if they go up.

If your neighbour fires in a lump sum, they can knock years of the redemption and save a fortune in the current situation.