G'day all..
I have my mortgages through wizard and through my calculations i was always paying around the .9% mark principle on top of my interest. Today the previous months 90 basis point drop came into effect on my loans…only problem is it now appears I am paying between 1.2 and 1.5% princciple. Is this there mistake or have I missed something along the way? any help would be appreciated. cheers
tugger
Hi Tugger
You should work it out using a proper calculator, I think the lower the rate gets the higher percentage the principle will be as there is less interest. Excel has a good amortisation sheet in it.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
When the interest rate drop occurred to your loan did your repayment amount drop?
At the start of a 20 year mortgage you will be paying a very small amount off your loan principle but as time passes your loan principle reduces and you pay more off the principle due to less interest being charged and the same repayment being made.
As an example lets take a 400,000 loan over 30 years at a interest rate of 7.74%
At 30 years Repayment is 660.25 a week and interest is 595.38 a week .
travel 2 years into the future and interest is 585 and principal is 75 a week
Take a .90 % reduction and
At 30 years Repayment is 660.25 a week and interest is 526 a week .principal = $133 a` week
travel 2 years into the future and interest is 506 and principal is 153 a week
You really need to forecast the longer term effect in your calculations also and try to make repayments more frequent like take monthly payment * 12 / 52 to get weekly payment and pay it weekly if possible.
Your mortgage is most likely calculated daily and interest is added each day to get monthly charge.
I used an excel template caleld the amortisation template.
daily interest = daily balance * yearly interest rate/360
they use 360 or 365 depending on what standard they are using.
Even though you are paying the same repayment , if the interest rate increases then you lose the extra repayment on the priniciple you are currently gaining on due to the lower interest rate.Thanks for that… just means that although interest rates are coming down my p&I repayments don't decrease by that full amount really. Oh well…. no big dramas. Thanks for your comments.
Tuggersorry forgot to mention before that I am only 2 years in to a 30 year loan of $570k , having $20k in redraw available at the moment. Didn't think I would be affected this much in such a short time
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