Mortgage repayments

[boobesque]

lets imagine that i needed a mortgage to pay for a house costing �210,000. i have �20,000 which i use to pay the deposit and a lump sum (i have a seperate fund for estate agents fees) and have to borrow �190,000 from the bank. over 30 years this would be �528 per month without interest according to my calculator. online mortgage calculators however give me an estimate of over �1,000 per month to pay. this is nearly 100% interest. how is this? i thought the average is about 5% giving me a total of �554 to pay per month. what is going on here? have i missed something?

[Ethel]

�190,000 @ 5.5% a year = �870.84 interest alone.

This is without paying any capital.

[dzug]

You're missing two things:

the 5% is per year, not total or per month

more important. you pay it not only on the �528, but on the rest of the �190,000 as well, or at least that part of it that you haven't repaid.

[Ethel]

Sorry - posted too eary.

�190,000 at 5.5% = �10450 per annum.

This is �870.84 each month in interest alone.

On a repayment it would be around �1078.

That is not 100% interest. I don't know how you have done your sums.

[Ethel]

And remember interests rates are currently very low. They are very likely to rise alarmingly over the next few years.

And on that sort of mortgage life insurances, payment protection and so on are likely to be quite high. You need to add those figures into any calculations.

[matchmade]

Go for a mortgage with fixed-rate interest if you have any doubts that you can meet the payments - it removes uncertainty over interest rates. Also consider getting an offset mortgage so any savings or money in your current account are constantly reducing your debt.