RandomWalks

Mortgage

By A

In October 2029, we need to re-finance the house. When we get a new deal, there are three things to decide.

  • The number of years we want to pay off the loan - say 10 years, for example.
  • The interest rate[1] offered by the bank - say 2.5% for example.
  • The amount you will borrow - this is affected if we want to pay a certain amount back. So if we have outstanding debt $£100$, we can pay back $£30$, then the amount we borrow is $£70$, and the monthly payment is decided on that $£70$ bucks.

Shown below are different scenarios based on what the bank offers, and how much we pay back.

  1. It maybe that we have to re-finance again if the term length is like 15 years. In England, it’s common to get a fixed rate for say 5 years, and then 10 years dynamic. But no one ever pays dynamic, as you can always just re-finance after 5 years. ↩