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Switching banks for better motgage rates

  • 13-09-2011 3:01pm
    #1
    mark2003
    Registered Users, Registered Users 2 Posts: 59 ✭✭


    I took out a mortgage two years ago for 200,000 at 2.65% interest for 20 year term for a 2yr fixed mortgage.That 2yr term is up in 2nd of October. Just want to know two things. first can i stop the mortgage with the bank when the term is finished. Also I have 26,000euro roughly paid on the mortgage(interest and principal combined). the bank has told me that the mortgage at present is 187,000,so basically i have 13,000 on interest and 13,000 roughly principal paid. Would i still have to pay the 187,000 to the bank to stop the mortgage.The bank says i do.Its a pure rip off if I do. Thanks


Comments

  • #2
    cookie1977
    Registered Users, Registered Users 2 Posts: 6,794 ✭✭✭cookie1977


    I'm not following completely but you can go to another bank and see if they'll give you a mortgage. At that point you basically pay off the other bank and start your new term and new interest rate with your new bank. There are very very very few mortgage switchings going on at present. So good luck. Maybe speak to a broker


  • #3
    mark2003
    Registered Users, Registered Users 2 Posts: 59 ✭✭mark2003


    Sorry for the confusion,but how can a bank charge 13,000 euro interest in two years on a principal of 13,000euro.


  • #4
    cookie1977
    Registered Users, Registered Users 2 Posts: 6,794 ✭✭✭cookie1977


    That's not unusual. It's how mortgages work. You will initially pay lots of interest and depending on the rate, very little capital. As you pay off the mortgage the interest amount reduces and you start paying off mor capital. Plus you fixed your rate for 2 years (at a good rate too ;) )

    http://www.mtgprofessor.com/a%20-%20interest%20rates/interest_rate_fundamentals.htm


  • #5
    amen
    Registered Users, Registered Users 2 Posts: 2,781 ✭✭✭amen


    Would i still have to pay the 187,000 to the bank to stop the mortgage

    Yes. You took a mortgage (loan) of 200,00 over 20 years with an agreement to pay back the mortgage over 20 years X% interest with the interest rate fixed at y% for the first two years.

    Once the first two years are up you switch back to X% interest rate and you have 18 years left.

    You got the 200,000 so why would you think you did not have to pay the rate back ?
    but how can a bank charge 13,000 euro interest in two years on a principal of 13,000euro

    The bank didn't. They charged interest on the 200,000(principal).
    Say you are paying 5% interest. A monthly payment might be 1,319.
    In the first month of this 1,319 payment 833 would be interest and 486 premium.

    The interest of 833 is calculated by taking the Interest Rate of 5% and dividing by the number of payments in the year (12 in your case) giving and interest % of 0.4167 which multiplied by the principle of 200,000 gives 833.

    The principle payment of 486 is subtracted form the principle of 200,00

    In the second month of this 1,319 payment 831 would be interest and 488 premium.

    The interest of 831 is calculated by taking the Interest Rate of 5% and dividing by the number of payments in the year (12 in your case) giving and interest % of 0.4167 which multiplied by the principle of 199,513 gives 831.

    If you got the money you owe the money


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