**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