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DonnieDarker

For Every £ You Pay On A Mortgage 43p Goes To Bank.

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I've been calculating mortgages and based on a 25 year repayment at 5% interest I calculate that for every £ you pay on your mortgage you only own 57pence and the rest is eaten up by interest to the bank.

Does this sound right? (Makes me feel good about not having a mortgage).

Going with this logic this means that every £1000 you can save towards a deposit is actually worth £1430 to you because of the interest avoided on borrowing that extra grand.

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I've been calculating mortgages and based on a 25 year repayment at 5% interest I calculate that for every £ you pay on your mortgage you only own 57pence and the rest is eaten up by interest to the bank.

Does this sound right? (Makes me feel good about not having a mortgage).

Going with this logic this means that every £1000 you can save towards a deposit is actually worth £1430 to you because of the interest avoided on borrowing that extra grand.

To start with it's more than that.

Have a play with this amortization calculator and you'll see.

http://jeacle.ie/mortgage/

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100K over 25 years @ 5% = 177K

Therefore for every £1 you borrow you pay back £1.77

So for every £1000 you save, you save £1770 in mortgage terms!!

Edited by OzzMosiz

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Here you go Donnie, you might like my spreadsheet. A bit crude, but it has all the info I need! Play around with the figures, you will see its mostly interest at the start of the term.

Notes: On the "Breakdown of Mortgage" worksheet, you can change all the values in yellow. If you decide to MEW put a minus figure in column "I". You can see a graph on the "Mortgage Payment Graph" worksheet.

Also, you will find my budget spreadsheet on the "Living Costs" worksheet. Change all the figures in Orange.

Sit back and Enjoy.

Edited by Jason

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100K over 25 years @ 5% = 177K

Therefore for every £1 you borrow you pay back £1.77

So for every £1000 you save, you save £1770 in mortgage terms!!

Yes and the £££s you pay at the beginning of the term are the most expensive so if you are able to overpay your mortgage it's really worth while.

When you are looking at buying something you don't really need costing eg £100 ask yourself if it's worth £177 because thats it's real cost to you.

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Donnie,

I got a quote for a 10 year fixed @4.99% and the other 15 years based on 6%. For every £ borrowed £1.87 paid back!

How many others don't know this?!!!!!

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Donnie,

I got a quote for a 10 year fixed @4.99% and the other 15 years based on 6%. For every £ borrowed £1.87 paid back!

How many others don't know this?!!!!!

The scary thing is, people going for mortgages 6 x salary are actually paying back around 11 times salary by the end of the mortgage!!!!!!!!!!

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I've been calculating mortgages and based on a 25 year repayment at 5% interest I calculate that for every £ you pay on your mortgage you only own 57pence and the rest is eaten up by interest to the bank.

Does this sound right? (Makes me feel good about not having a mortgage).

Going with this logic this means that every £1000 you can save towards a deposit is actually worth £1430 to you because of the interest avoided on borrowing that extra grand.

I'm getting 58.8, but that is on a 4.8% over 23 years.

In terms of equity settlement to interest, the longer it takes the lower the ratio, the higher the interest the lower the ratio, the earlier you pay it off the higher ratio. Also in terms of the first 5 years, you pay almost nothing in terms of the equity since it is offset against mostly interest. It picks up steam exponentially as the loan goes down.

I've never really been 100% about this "rent is dead money" hypothesis, since it tends to be put by STRs who have a more accute financial vested interest than me in the price of property. But having started with a "RENT MAY OR MAY NOT BE DEAD MONEY" when I tested it, even with the horric rents in London (I calculated at 750 pcm because I tend to live in crappy areas) I found that if I paid rent and saved 5K for 4 years and then reduced the morgage length by 4 years I would be 7K better off over the 25 year period before I was "home free". I feel better now :D

Edited by Elizabeth

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Guest Charlie The Tramp

Borrow 200k over 25 years at

5% you repay 354.762k, 8% 468.393k, 10% 550.839k, 12% 637.497k.

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In terms of equity settlement to interest, the longer it takes the lower the ratio, the higher the interest the lower the ratio, the earlier you pay it off the higher ratio. Also in terms of the first 5 years, you pay almost nothing in terms of the equity since it is offset against mostly interest. It picks up steam exponentially as the loan goes down.

So if you need to move because you lost your job just make sure it's after 15 years else get stung with another front end loading??

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So if you need to move because you lost your job just make sure it's after 15 years else get stung with another front end loading??

You can chose your mortgage term, so if you move after 5 years, go for a 20 year term (as long as the prices and your wages are similar).

It is important to make sure you can overpay from day 1! Most mortgages will allow some overpayment, so make sure you know how much you can overpay and aim to do so. It really will bring down your mortgage term and the total amount you pay.

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I recently bumped into this website mortgagesexposed.com and thought it worth a bookmark. :) The mortgage content appears very detailed and authoritative, and it does explain things very clearly, but the navigation (frames, ugh!) is a bit if a pain.

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Is my spreadsheet useful to anyone?

Its cool. I need one of these. I like the way you've added the living costs calculator. Why did you push it up to 6% in the 73rd month? Do you know something we don't?

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Is my spreadsheet useful to anyone?

Very! Thanks Jason.

Makes for intersting reading...tells me that when I come to buy there will still be almost enough left at the end of the year to use my ISA allowance.

Still not buying for a year!

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Its cool. I need one of these. I like the way you've added the living costs calculator. Why did you push it up to 6% in the 73rd month? Do you know something we don't?

lol. I was just playing around with figures.

The living costs are what I think they would be today, you can tell me what isn't realistic (as I live with my parents), the deposit is what I would expect to have in a years time.

The only thing I have missed off is "pension" (although the option is on there). Scottish widows says I would need to put away £273 a month today (Link: http://www.scottishwidows.co.uk/preparatio..._retirement.htm)

Maybe we should have such tools like this on this website (as a download) - although it would need smartening up a bit?

Edit: There is a **** up in the forumla. "Living Costs"E9 should be "=(E5+E6)-(E7+E8)" (now corrected)

Edited by Jason

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Jason,

Good work. You did however miss things like savings and credit cards!

Savings is at the top in terms of deposit. I haven't included credit card, or debt repayments, as I wouldn't buy a house if I was in debt (crazy I know :blink: ). Any future purchases (food, luxuries etc) would be budgeted in the main spreadsheet. Easy to add if need be...

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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