Sunday, May 19, 2013

Should be higher

Yesterday I sat and watched the Eurovision "song" contest for the first time. The reason for this was a post BBQ TV session, nestled into Bruce and Nina's comfortable new reclining sofas. Nina was celebrating her 30th birthday, they were throwing a BBQ day. I arrived about 5, in time to help out cooking the meat. Bruce hand managed to get the coals so intensely hot the hairs on my forearms got singed while flipping a burger! Holly Jo, Phil and Caroline were already there. The food was fantastic and plentiful after gorging on burgers, and kebabs there was homemade cake. I sank into the recliner, and sat back in to take in the delight of Euro vision. Phil used his industry knowledge running a commentary on the stage and set design. He was impressed by the Swedes I think, especially the projects onto the presenters dress. I found the music pretty dreary, however with a room full of good company and banter it was bearable enough. I caught acab to the Cheadle Hulme with Phil and Caroline just managing to fit in a Gin and Tonic night cap before catching the train home.

Thursday, May 02, 2013

Like Spinning Plates

Apparently more than 250,000 people will be unable to repay there interest only mortgage at the end of its term. Interest only mortgage were very popular as they reduced monthly payments. In an standard repayment mortgage each payment pays the interest and a small part of the capital. Over time the proportion of your repayment covering the original borrowing increases as the size of the borrowing reduces. In the interest only scenario you only ever pay the interest on the original borrowing, and at the end of the term usually 25 years you still owe the original amount borrowed.

For example on a £100,000 borrowing at £3% over 25 years with a £995 fee added the monthly repayment would be £474 / month totalling £143,258 over the mortgage, an interest only mortgage you would pay £250 / month and £75,995 in total (plus the additional £100,000). So overall although the monthly payment is lower the overall cost of the mortgage is considerable higher £32737(around 22%).

 Proponents of interest only included, saving the money into a separate investment might be more beneficial over the long run (you can check this using Money Savings Exerts payment calculator). Also the rising value of the property would enable you do sell up downsize and pocket the difference. Interest only also makes a lot more sense on investment property as it frees capital for investments or improvements. If you have an interest only mortgage you need to decide on the best plan of action for you, but bear in mind though it might cost more a month in the long term it could save you a lot of money to switch to repayment.