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Overview

For a general discussion on how repayments or APR are calculated click here

For a general purpose repayment calculator click here

However, all institutions offering mortgages provide repayment calculators and APR information on their respective websites.  Newspaper supplements regularly provide constantly updated information.

Comprehensive guides entitled "Mortgages made easy"  (English and Irish versions) are available from the Financial Regulator at www.financialregulator.ie .  Click "Consumer Information" and "Current Publications" ...

With so much information in the public domain, this section does not attempt to be comprehensive, but concentrates on a couple of points only.

How interest is applied

Interest on most bank mortgages is charged on a "per diem" basis.  Every time that a transaction arises, interest is calculated from the relevant date of the previous transaction to the relevant date of the current transaction.  The interest is accumulated up to the end of the "interest charging period" and then added to the outstanding balance of the loan. The interest amount is notified to the customer before charging, unless the interest amount is very small. Interest charging periods are typically quarterly. 

Interest in certain institutions is charged on the basis of annual rests.  In an annual rest calculation, interest is charged for the full year on the balance outstanding at the start of the year.  As repayments are made through the year, they are ignored in the interest calculation.  The repayments are accumulated until the end of the year and then applied to reduce the start balance for the next year.  In such a system, the repayments are precalculated to match this system, and are higher than in "per diem" systems.  In this type of system, when a rate change occurs in mid year, a calculation similar to a year-end calculation is performed to obtain a "true" balance outstanding, before recalculating the repayment for the remaining period of the mortgage.

Capital and Interest Payments

The "Mortgages made easy" guide mentioned above carries an illustration on capital and interest payments (page 8).  Visually, it suggests that in a 30-year mortgage, the ratio of interest content in the first years repayment looks like about 80%, and that this declines as the mortgage progresses.  Here are the actual figures for a 30 year mortgage at 5%.

Year

What percentage of your repayment is interest

1

77%

2

76%

3

74%

4

73%

5

72%

6

70%

7

69%

8

67%

9

66%

10

64%

11

62%

12

60%

13

58%

14

56%

15

54%

16

52%

17

49%

18

47%

19

44%

20

42%

21

39%

22

36%

23

32%

24

29%

25

25%

26

22%

27

18%

28

14%

29

9%

30

5%