admin answers:

The idea behind a mortgage (a fixed rate mortgage) is that you pay the same payment every month for 30 years (or 15 years or whatever the term of the loan is).

The “amortization” refers to how often the interest is calculated. Mortgage loans are “amortized” on a monthly basis. That means that your mother gets a bill for the interest every month. Every month, she pays 0.58% in interest on the outstanding balance for the month. (The 0.58% is derived by dividing the 7% annual interest rate by 12 since there are 12 months per year.) Let’s say that the outstanding balance in January is $100,000. The cost of that money for the month of January is $583. If your mother’s monthly payment is $1,000, then $583 goes to Interest and the rest ($417) goes to Principal (to reduce the amount your mom owes on the loan). So in February, the outstanding balance is not $100,000 but $99,583. If you calculate the Interest bill for February (0.58% of $99,583), it comes to $581 ($2 less than she paid the month before). Since she pays $1,000 every month, $2 more goes to reducing the principal balance for that month ($419). In March, her principal balance is $99,164.

The bottom line is that in the beginning of EVERY mortgage, the amount of the payment that goes toward Principal is very small at the beginning of the loan but the amount going to Principal gradually increases with every payment. The longer the term of the loan, the more slowly it increases. (In other words, a 30-year loan amortizes more slowly than a 15-year loan). At the end of the loan, the majority of the montly payment goes toward Principal.

Everything that I’ve described above pertains to a Fixed Rate Mortgage. If your mother has an Adjustable Rate Mortgage (ARM), then Interest Rate adjusts at certain points in the loan and the loan is reamortized. If your mother has a “balloon payment” at the end of the mortgage, then this will also change a normal amortization.

According to my calculations, if your mom’s loan is a 30-year fixed rate loan with a monthly payment of GBP900, her original principal balance was GBP135,277.

There are tons of free Amortization Schedules online. Search for one, plug in your mom’s interest rate, outstanding principal balance and the loan term (usually in months, not years) and the Amortization Schedule will show you how the money that goes toward Principal gradually increases and the money that goes toward Interest gradually decreases over time. If you look through your mother’s loan papers, you will almost certainly find an Amortization Schedule.

Hope this helps.

Good luck!

admin answers:

A mortgage is a contract. By allowing these deadbeats to break the contract and get their interest rate frozen it will encourage more of this type of risk taking that will just encourage the folks to do it all again thinking the government to bail them out again.

admin answers:

If your mortgage is fixed rate, then that is the rate you’ll be paying on it, regardless of what is happening to interest rates in general.

For example, say when you took the mortgage out they said “we’ll charge you 5% interest fixed for 5 years” then even if mortgage rates go to 1% or 20%, you’ll still be charged 5% for the next 5 years. It’s a “gamble” that you entered into. If mortgage rates went up to 20%, you win, because you still pay 5%. If they went down to 1%, then you lose because you’re still paying them 5%.

Paying at your fixed rate will not pay your mortgage off any earlier, you won’t get a rebate because interest rates have gone down, you will still be on your “fixed” interest rate.

Depending on how much you owe, how much the interest rate is that you are paying at the moment, how long you have left to run till the end of the 5 years and how much of a penalty you will incur for terminating your agreement, it may be worth looking to change your mortgage to either a variable one or (if you prefer the security) a new, lower, fixed rate mortgage. Only in that way, by using the extra money that you would have been paying, you may be able to pay off your mortgage earlier.

admin answers:

It could. I wish I could be more specific but without knowing which lender you asking about, I simply can’t give you a better answer. They fall into three categories. Some haven’t and probably wont; some will give a better rate if your record is good; the last will only do it when the numbers get better.pp

admin answers:

The shorter your lock, the less it costs. If you want to lock your rate for a longer amount of time, it will cost more money because a lender takes on risk to guarantee that rate for you. So yes, a 30-day lock would be less, but 15 would be even less. Less risk = less cost.