Interest rate changes: calculate on original amount?

D

Damobee

Registered User
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When the interest rate on a mortgage changes, is the change calculated on the original amount borrowed or on the amount owed at that particular time.

I borrowed 265K in 2005 over 25 years on a tracker mortgage. I now owe 203K and the rate is 1.75%.

Should the 1.75% rate be calculated on the 265K over 25 years or on the 203K over 16 years? I'm with EBS and they seem to be calculating it over the 16 years.
 
It's on the amount owed. They can't charge interest on money you've already paid back.
 
ronaldo said:
It's on the amount owed. They can't charge interest on money you've already paid back.
Click to expand...

Thanks for the reply. So which of these are correct:

1. 265000 at 1.75% over 25 years = €1091 per month

2. 203000 at 1.75% over 25 years = €835 per month

3. 203000 at 1.75% over 16 years = €1212 per month
 
aamusername said:
Take a look at this calculator and input your figures:


It looks like 203,000 at 1.75% over 16 years is approx. 1,212 per month.
Click to expand...

Thanks for that.

However, this is the bit that confuses me.

I borrowed 265K in 2005 at say 2.5%. Using the loanclc website, my repayments would be €1188 per month.
I now owe 203K and the rate is now 1.75%. Should EBS be calculating it as 203k at 1.75% over 25 years or over 16 years.

If it's over 16 years, I'm paying more than when I took out the loan even though the interest has been reduced.
 
If you want to see a full breakdown (even to month by month, year by year) you can put all your information into this calculator:
http://www.drcalculator.com/mortgage/ie/
This allow you to take account of rate changes and so on over the life of the mortgage. The "Annual Table" will probably be of the most interest to you.
 
Have you read the key posts thread in this section too? There is a pretty in-depth "guide to mortgage repayment calculations" thread linked to from there which might be of help.

I should have said that ronaldo above is correct, they should be calculating the amount you owe over the remaining term of the mortgage. In your case, based on the figures you have supplied, this seems to be 203,000 over 16 years.
 
aamusername said:
If you want to see a full breakdown (even to month by month, year by year) you can put all your information into this calculator:
[
This allow you to take account of rate changes and so on over the life of the mortgage. The "Annual Table" will probably be of the most interest to you.
Click to expand...

Thanks but that's still not answering my query.

In my opinion, the calculation should be 203K at 1.75% over 25 years (as 25 years was the original term) = €835 per month. However EBS appear to be calculating it as 203K at 1.75% over 16 years (as 16 years is the outstanding period on the mortgage).
Which is correct?
 
I thought I answered your question here:

I should have said that ronaldo above is correct, they should be calculating the amount you owe over the remaining term of the mortgage. In your case, based on the figures you have supplied, this seems to be 203,000 over 16 years.
Click to expand...
 
aamusername said:
I thought I answered your question here:
Click to expand...

If I do these simple calcs, your opinion that it should be calculated over the 16 years doesn't make sense to me. What am I missing?

Original amount 265000 at 2.5% over 25 years = €1188 per month

New amount using the 16 years left on the mortgage: 203000 at 1.75% over 16 years = €1212 per month

I would have thought it should be over the 25 years. I should be getting upset when the interest rates go down if do it over the 16 years!!
 
I think it looks odd because the balance should be lower if you've been making repayments for 9 years. Your balance should be closer to 188k rather than 203k. Did you miss any repayments along the way? Are you sure the remaining term is 16 years?
 
millieforbes said:
I think it looks odd because the balance should be lower if you've been making repayments for 9 years. Your balance should be closer to 188k rather than 203k. Did you miss any repayments along the way? Are you sure the remaining term is 16 years?
Click to expand...

Yes, I could be wrong with the number of years but my query is more to do with the rate being calculated over the original period (25years) or the period that's left (say 16 years)
 
16 years... No bank bases calculations off the original term when the rate changes - if they did, the mortgage would never end...


Sent from my iPhone using Tapatalk
 
@damobee how could your repayments on a 25 year loan with 16 years left be calculated over 25 years?

As other posters have suggested if you have made repayments for 9 years at 2.5% then the amount owing should be lower than €203k and therefore the monthly repayments lower.
 
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