Renegotiating my mortgage.

thebiggestjim

Hi All,

I have been thinking about approaching my bank to renegotiate the structure on my mortgage. Basically the case with my mortgage is that most of my monthly payments go towards interest with very little been taken off the outstanding balance. I believe after 7-10 years of payments more of your payment goes towards the balance. This I believe is the structure of most mortgages. Banks recognise that most people will sell their houses after 7-10 years, upgrade or whatever. By structuring the mortgages this way the banks will make the most amount of money off the customer.
Well that’s all good and well if im seeing a modest rise in the price of my property, but as we all know that is not happening right now.

So my question is has anyone renegotiated their mortgage to have an even portion of interest applied to their monthly repayments throughout the lifetime of their mortgage?

Does anyone know of any tricks or techniques to reduce the outstanding balance quicker? A friend of mine suggested by splitting your mortgage payments to twice a month you can reduce greatly the amount of compound interest incurred over the lifetime of your mortgage.

Thanks for any replies, Im sure this thread will be of benefit to others.

auditek923

try putting it in writing and send it to them. there is a lot of people doing this now and banks are viewing each case

pebbles21

http://www.whatmortgage.co.uk/calculators/fleximortgage.html



if you mean paying more than your actual repayments and you can afford it this is a great thing to do

the interest and the life of the mortgage is greatly reduced

thebiggestjim

Thanks for the input, I don't actually mean overpaying. I mean negotiating with my bank to have the amount of interest fixed over the term of my loan instead of top-loaded in the initial years. This will reduce the amount I owe quicker and offset the reduction in house value.
Overpaying seems like a good idea if you can afford it.

nouveau_4.0

I'm open for correction but I was under the impression that the banks dont "structure" the ratio of interest and principle. The interest paid depends on your interest rate by the principle left. Therefore the ratio naturally decreases as your paying off principle.

Therefore the only way to reduce your interest payments is to reduce the principle either by dumping a lump sum into the mortgage to reduce the principle or by overpaying.

happy09

pebbles21 wrote: »

http://www.whatmortgage.co.uk/calculators/fleximortgage.html

Thanks for this link! Very helpful!

VB1962

nouveau 4.0 has it in one - the mathematics of compound interest are what you need to adjust - interest is accrued and charged on the principal amount outstanding so the only way to reduce the interest amount is to make a lump sum reduction to the principal outstanding.

Banks don't structure it this way to 'overcharge' you - its simply the maths.

However, many people pay their mortgage monthly but if you paid weekly you would be reducing the outstanding principal more often and while it might seem very little, over the period of the mortgage it will have a beneficial effect. Also, even a relatively small lump sum reduction (say, €500) has a significant effect when made in ther early days of a mortgage.

BossArky

Your best bet is to try to overpay as much as possible each month. This reduces the interest you have to pay.

Another option is to ring your bank and ask if they will reduce the term of your mortgage. Lets say it was initially for 25 years and you are now 10 years though --> this means you have 15 more years to run. Ask the bank if they will reduce the existing term from 15 to 12 years, or even 10. This will increase your monthly payments obviously..... but a greater proportion of it will be capital as opposed to interest.

It is not possible to have any even amount of interest and capital in each payment. As has been said above, compound interest is just maths, not the bank trying to rip you off.