cost of reducing term of mortgage getting higher?

C

CillianB

Registered User
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14
At the risk of sounding like a innumerate idiot, I'm a little baffled at
why, the further i am into my mortgage, the more expensive it's becoming to reduce term.
If anyone can put me out of my confused misery, I'd be delighted.

Currently my tracker mortgage (rate: 2.25%,ECB Rate + .75%) has a balance
of approx €52,270 with an expiry date of April 2020.
My bank has told me it would require a lodgment of €29,000 approx to reduce
the term by exactly 5 years to April 2015.

Now when i inquired about making an identical reduction in loan term in March 2009 when the loan balance was €66,835 (rate: 1.75%) I was told it would cost €27,000!

In 2006 Courtesy of my SSIA I was able to reduce the term of my mortgage by 8 and half years and it cost me only €32,000!

Original mortgage for €120,000 over 25 years taken out Oct/Nov 2003.

I'm not even sure if paying down a mortgage with a low interest rate in preference to earning a better rate on deposit is wise. But with Ireland's currency future in doubt. i figure paying down debt might be the way to go??
any thoughts on this would also be welcomed.
 
I know what the answer is,but putting it down in a reply is difficult!
Basically,you are no longer making huge savings on future interest due as you are at a stage in the mortgage where you have very little interest left to pay(about 5.5k).So to half your term you basically need to pay half the capital.
 
Should decrease slightly further after the ECB rate decrease as you are on a tracker.
However, who knows how these rates will go over the remaining 8+ years of your term.

Most of your payments now are capital rather than interest so each payment is proportionately a higher ratio of capital V interest as vandriver states
 
Go to a mortgage calculator that has what's called an amortization table. I use bankrate's one. Its an american one but if you put in the details of your mortgage it will still give fairly accurate figures. If you click on the amortization table it will show you how your mortgage payment is broken down each month into the capital and interest portions. You can see from this how a lump sum payment, a year into the mortgage will have a greater affect on the mortgage term than one 10 years later - because you are immediately cutting the amount of interest being paid overall. As most of the payment at the start is paying interest on the original capital by bringing the capital down you are lowering the interest payment to what it would be if you were say five years into the mortgage - more of your monthly is now going off the capital. Have I made it as clear as mud?
 
Why do you want to reduce the term? your interest rate is 2.25%.
 
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