Useful article >>>Mortgage calculator – How UK mortgage lenders calculate your mortgage payments
This commodity provides some advice on how mortgage lenders in the UK account your mortgage payments. There are no set rules authentic by the Finacial Services Authority (FSA ), about lenders allegation be authentic on the illustrations and mortgage action abstracts they accumulation to you.
How absorption is charged
Mortgage lenders use a cardinal of altered methods for charging interest, these methods abatement into one of three categories: -
Daily absorption charging.
Monthly absorption charging.
Annual absorption charging.
Annual absorption charging
The best simplest of these is the anniversary absorption charging method, this is absolutely the oldest adjustment adopted by lenders. Absorption is answerable at the alpha of the year based on the mortgage antithesis figure. This absorption bulk is again disconnected through the 12 months of the year for anniversary acquittal for an interest-only mortgage or accumulated with basic for anniversary acquittal if a abounding claim mortgage.
Interest-only calculation
Monthly acquittal = (balance x rate)/12
So with a antithesis of £100,000 and a amount of 6.5%: -
Monthly acquittal = (100,000 x 0.065)/12
Monthly acquittal = £541.67
Full claim calculation
Monthly acquittal = [[rate x (balance x (1+rate)^term)]/(1-(1+rate)^term) ] / 12
so with a antithesis of £100,000 and a amount of 6.5%: -
Monthly acquittal = [[0.065 x (100000 x (1+0.065)^25)]/(1-(1+0.065)^25) ] / 12
Monthly acquittal = £683.18
Monthly absorption charging
With account absorption charging, the anniversary absorption amount is aboriginal disconnected by 12 to authorize a account absorption rate. This fresh account absorption amount is again activated to the mortgage antithesis to account a account absorption allegation for anniversary acquittal on an interest-only mortgage or accumulated with basic for anniversary acquittal if a abounding claim mortgage.
Interest-only calculation
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