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Mortgage/house value

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  • Mortgage/house value

    Hi all,

    I have a question hopefully someone can help with, if a property is bought for £150,000 say, and the mortgage taken out over 'x' amount of years, and with interest, the actual mortgage when payed back in full is say £280,000 due to interest etc- if the property is then put on the market and was sold for £180,000 - what happens to the 'other' £100,000?? Is it still payable?

    Is it then carried over into the next property you go for?

    Hopefully I am coming accross clear enough for someone to reply!

  • #2
    Re: Mortgage/house value

    Hi Callum,

    Most mortgages are calculated on a daily interest basis these days so you only pay interest for the number of days that you owe the money.

    If you paid a mortgage off 2 years after it started you would only pay 2 year's worth of intrerest (plus any charges for redemption) plus the amount of capital outstanding (which, if it's a repayment mortgage, would be slightly less than when you started).

    The interest over the full term is not added to the debt on day one as you are thinking.

    Hope that makes sense.
    ____________________________________________
    Property for sale in Torquay

    www.thomasdobner.co.uk

    Comment


    • #3
      Re: Mortgage/house value

      Hi Callum,

      Just to clarify my last message - on a repayment mortgage each monthly payment you make covers the interest for that month plus an extra amount to pay back some of the capital.

      So if you paid off your mortgage after 2 years then you would already have paid 2 years worth of interest through your regular monthly repayments. This means that you would be left requiring to pay back the remaining amount of the capital plus any charges for redemption.
      ____________________________________________
      Property for sale in Torquay

      www.thomasdobner.co.uk

      Comment


      • #4
        Re: Mortgage/house value

        Thanks IFA,

        Trying to get my head round it all, basically the projected figure paid at the end of the mortgage is more hypothetical, and the main amount to be paid back to the lender if moving is the amount borrowed, not including the interest? Is that correct?

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        • #5
          Re: Mortgage/house value

          That's basically it.

          The "Total Payable" is indicative only based on the assumption that you keep the mortgage for the full term, you make every payment at the time it's due, you never overpay, you never underpay or miss a payment, you never make any other adjustments, and any variable interest rates applicable during the term never change.

          In other words, it's almost certainly inaccurate but gives a means of comparison.

          When you redeem your mortgage the capital balance is what is due back to the lender plus any arrears and charges where applicable.
          ____________________________________________
          Property for sale in Torquay

          www.thomasdobner.co.uk

          Comment


          • #6
            Re: Mortgage/house value

            Thank you IFA, helpful as always!

            Thanks again, much clearer now.

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