## True-Cost-Mortgages

### How to calculate the repayment

e.g.:

Amount of mortgage: 100.000 £
interest rate: 6%
1st repayment rate: 1%

 1. Year: 2. Year: The starting debt (amount of mortgage) 100.000 £. An interest rate of 6% results in the 1. year to 6.000 £. With a starting repayment rate of 1% that makes a repayment of 1.000 £ During the 1st year now 1.000 £ have been paid as a repayment, so the rest-debt is only 99.000 £ for the 2nd year. 6% interest on the rest-debt of 99.000 £ is 5.940 £. An annuity of 7.000 £ allows us this year a repayment of 1.060 £. interest 6.000 interest 5.940 repayment 1.000 repayment 1.060 annuity 7.000 annuity 7.000

The annuity doesn't change , the repayment increases.

Equal annuities are only valid for the "naked" mortgage. As soon as you add energy-costs to the equation, the annuity is changing.

Term of the mortgage: The duration of the term of the mortgage is much influenced by the initial repayment rate.

If you follow the above example and change the initial repayment to 2%, then compute for the 1st year as follows:

6.000 £ interest
2.000 £ repayment
8.000 £ annuity

The rest of the debt in the 2nd year is now only 98.000 £. The term of the mortgage will be shorter now.

Example for terms:

amount of mortgage: 100.000 £ and interest rate: 6%

term for an initial repayment of 1% = 34 years
term for an initial repayment of 2% = 24 years
term for an initial repayment of 3% = 19 years