Mortgage payments after reduced rate.

[rooster]

My mortgage interest rate has come down from 4.79 % to 2.5% but my payment hasn't come down as much as expected. Do you calculate the interest on amount remaining with term remaining or initial mortgage with full term. I.e. For a mortgage of 114k over 25 years but with 75 k left after 9 years . Is the new payment

2.5% of 114k over 25 years
Or
2.5% of 75k over 16 years

I thought it would be first one , if interest rates we 2.5% initially that would be what I would pay so why does it differ now?

[B0zza]

You'll almost certainly be making far higher capital repayments now. The way most mortgages work, is something like the simplistic example below...

1. 25 years repayments at £100 per month (if interest rates stay the same through the term of the mortgage).

2. Month 1, you pay £100 being £99 interest and £1 capital repayment.

3. By month 300, the £100 you pay will be something like £1 interest and £99 capital repayment.

If the numbers you give are correct for you, I'd expect each 0.25% fall from a starting point of 4.79% to mean you pay about a tenner a month less. As such, I'd guess your monthly payments have reduced by about £90 a month to somewhere a touch below £500, give or take.

[rooster]

Here are my exact numbers. Wee bit complicated.

114K mortgage over 25years. Just came off a fixed rate of 4.79 % . My monthly payment was £652 which is exactly what the online calculators say. But now I have £65989 left on Mortgage after 9 years . I overpaid for about 18 months but got term reduced rather than amount so now they say it finishes Jan 2022 .
Anyway as said before £114k for 25 years at new rate would be £511 at 2.5 % . Edit just punched in 21 years which in effect is what the term is reduced to becuase of my overpayments and it comes out to £583 which is what they are asking for.

Still not sure if thay have got that right though . As if I take the remainging 65989 over 11 years so ends in Jan 2022 then it would be £570 a month ... Totally confused now.