Mortgage Interest Calculations

[user180224]

I'm looking at a €250,000 mortgage, 4 year fixed at 3.65% and trying to decide on term. I've done my calculations and from this after 4 years the difference in interest between 30 year term and 25 year term is only €2,211 so €553ish per year

	Balance	Total Paid	Capital	Interest	Repayments
30 Yrs	€229,359.66	€54,895.15	€21,140.30	€33,754.85	€1,143.65
25 Yrs	€222,491.85	€61,044.51	€28,172.99	€32,871.52	€1,271.76
20 Yrs	€211,936.61	€70,523.66	€38,980.19	€31,543.48	€1,469.24

Then comparing 30 years but overpay 10% monthly, versus 25 years.

	Balance	Total Paid	Capital	Interest	Repayments
25 Yrs	€222,491.85	€61,044.51	€28,172.99	€32,871.52	€1,271.76
30 Yrs overpay 10%	€223,611.19	€60,384.66	€27,019.26	€33,365.40	€1,258.01

I'm basically looking for someone to double check my figures as I'm surprised with how little the interest is.

It seems like taking a 30 year mortgage and perhaps overpaying the 10% monthly is a good option while saving. Then after the 4 years I'll likely have 100k to pay off the balance once the fixed rate ends meaning in 4 years I can look at refixing with a much lower balance. I like the idea of still having a healthy saving balance.

I'm also debating taking a €275k mortgage instead and put the €25k in a savings account which returns 3.9%, now obviously after DIRT it would be less but I'd pay the difference in interest as an "insurance" premium having the cash on hand if needed.

Does this make sense?

 

[Brendan Burgess]

I am sure your figures are right, but so what? You are asking the wrong question. In fact, your question, doesn't mean very much.

If you have a higher mortgage you will pay more interest.

1) You should take out a mortgage for as long as possible because the contractual repayments will be lower.
2) You should then overpay that mortgage if you can afford to do so comfortably.

If you take out a 20 year mortgage and get into difficulties, you can't extend the term to 30 years without damaging your credit record and the lender might not agree.

 

[Brendan Burgess]

Then after the 4 years I'll likely have 100k to pay off the balance once the fixed rate ends meaning in 4 years I can look at refixing

You do not need to wait for 4 years. You can overpay the mortgage at any time, although there may be an early repayment penalty.

So if you get a bonus of €25,000 a year, pay it off the mortgage immediately. Don't wait until the fixed rate term is up.

The interest saved less any penalty will always be positive. You might like to compare it with the deposit interest you could earn so see if it makes sense to put the money on deposit until the fixed rate is up.

 

[Brendan Burgess]

I'm also debating taking a €275k mortgage instead and put the €25k in a savings account which returns 3.9%,

overpaying the 10% monthly

I'll likely have 100k to pay off the balance

There isn't much in it, so if you think you need an emergency fund, then go ahead.

But you are also talking about overpaying and having €100k in 4 years.

So maybe have a full rethink of your finances and decide if you need an emergency fund at all.

Is it the same rate? A lower Loan to Value will get you a cheaper rate.

 

[user180224]

I am sure your figures are right, but so what? You are asking the wrong question. In fact, your question, doesn't mean very much.

It means a lot to me. If they are wrong, I'll be making decisions based on incorrect facts.

Having low repayments and a healthy savings and investments will allow me to quit my job and work on my own things at least for a year or two, something I would value a lot more than the small interest savings.

 

[Brendan Burgess]

If they are wrong, I'll be making decisions based on incorrect facts.

That is like when Branson crossed the Atlantic in a balloon and landed in a field in Mayo and had no idea where he was?

He asked a local farmer, where am I?
And he said "You are in a balloon in a field"

Branson told him that the answer was correct, but useless.

In a similar way, the right answer to the wrong question isn't usually helpful.

Brendan

 

[user180224]

I'm really not sure what you're saying or what point you're trying to make. I want to make sure the numbers are correct, so I can make the correct decision for my situation...

 

[Brendan Burgess]

If I understand your question , you are asking if you should take out a 20 year or a 30 year policy based on the interest you would pay over the next 4 years.

I am telling you that the interest you pay over the next 4 years is not relevant to your decision.

You should take out a 30 year policy and pay it off as you see fit.

Brendan

 

[user180224]

The main question was is the calculations correct which I believe they are. From there I can work out whats best for my situation. Doing some quick maths on the break fees based on the existing mortgage it doesn't really make sense to overpay more than the 10% as the break fee and missed interest based on the BluOr account (less dirt) eats away any interest saved on the mortgage. Though obviously these break fees fluctuate so will need to be looked at again at the time.

At least now I know the calculations are correct so I can do the maths around what size mortgage to get.

 

[Homepayer]

The main question was is the calculations correct which I believe they are. From there I can work out whats best for my situation. Doing some quick maths on the break fees based on the existing mortgage it doesn't really make sense to overpay more than the 10% as the break fee and missed interest based on the BluOr account (less dirt) eats away any interest saved on the mortgage. Though obviously these break fees fluctuate so will need to be looked at again at the time.

At least now I know the calculations are correct so I can do the maths around what size mortgage to get.

Hi dude there's a great website often recommended here called Karl's Mortgage Calculator. It'll tell you the interest and principal per month or year. You can change the term, the interest rate. You can make early repayments.

You can confirm your figures there.

 

[user180224]

Thank you - they match up with my figures so at least I can make a decision now.