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Annual% to monthly%

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Pilsbury

Joined: 13 Dec 2004
Posts: 5645
Location: East london/Essex

Posted: Mon Apr 10, 06 8:37 pm Post subject: Annual% to monthly%

Can anyont tell me how to turn an annual APR rate into a monthly APR? is it really as simple as dividing it by 12?
The reason im asking is i have writen a little spreadsheet to keep me up to date with my morgage and how long i have left but to get it to work with any level of accuracy i need to put in the monthly intrest rate they use. With it i can alter the monthly repayments if i make any overpayments and it auotmatically works out the rest of the morgage life and amounts of intrest, I am really serious at getting shot of the morgage as quickly as possable so i will be tempted to chuck a few extra quid in each month if i can see it really making a difference to the lenght of time left.
I have talked to the morgage company and all they can tell me is the annual rate and that my intrest is worked out daily by computer but i just need a monthly figure.
If the equasion is complicated Then i am really only after the figure so if it helps my annual rate is 5.29%

Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Mon Apr 10, 06 8:43 pm Post subject:
Savings accounts can pay a different annual rate if you receive interest monthly to cater for compounding. I assume monthly mortgage rates will be similar. Don't you also need the interest rate not the APR as the APR takes into account all costs including fees which will be the same no matter when you repay it?

Penny Outskirts

Joined: 18 Sep 2005
Posts: 23385
Location: Planet, not on the....

Posted: Mon Apr 10, 06 8:52 pm Post subject:

APR is different to the interest rate you're paying. APR is a figure which is used by finance companies to compare the total amount you COULD pay over and above the capital amoutn you owe, during the life of the loan. So for example, in a mortgage APR it will include such things as the cost of redemption, any up front charges for a fixed rate, charges if you have your buildings and contents insurance elsewhere - all those lovely things that they lob on. The APR just lets you compare with some accuracy, the true cost of a loan. You need to know if the figure they've given you is APR or interest rate.

If your interest is calculated on a daily basis (most are now) then you need to look at the total amount outstanding on a daily basis. Assuming it is a daily calculated repayment mortgage, then hopefully the company won't front load the interest, that is, a large proportion of your payments in the early years go to paying off the interest charges and not the actual money you've borrowed.

The calculation is quite complex, but it can be done. I don't know if moneysavingexpert have a calculator or not?

Don't know whether this helps or not

Pilsbury

Joined: 13 Dec 2004
Posts: 5645
Location: East london/Essex

Posted: Mon Apr 10, 06 9:02 pm Post subject:

Thanks for the information, I'm not looking to be day perfect with my sums as its just a bit of a motivational tool really, so i can put in an over payment and see it really make a difference.
As far as i know 5.29% is the intrest rate im paying, i didn't realise the apr is different, as when i spoke to them today they told me it was the intrest rate.
I have asked them for a statment so it should have the cash amount of intrest i have paid each month and hopefully i can work the figures backwards to make it fit.
It is a fixed rate deal so the calculations should be good for at least another year

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Tue Apr 11, 06 9:51 am Post subject:

The maths isn't really complicated for a spreadsheet... BUT what is much more complicated is to actually understand the precise deal that you are trying to model...

For example: It's not unusual for a mortgage deal to *only* apply your overpaid amounts to the reduction of your outstanding loan at the end of each year.

If you are in a position to make frequent overpayments, and especially if you would feel more comfortable to have some rainy-day money on deposit and available for emergencies, then you should investigate whether changing to an "offset mortgage" would be beneficial.

The APR is a standardised means of comparing different products -- *BUT* it doesn't take any account of early repayment treatment, penalties, etc - in fact any deviation from the 'straight' use of the product.
If your circumstances (or use of the product) change, you should make sure of how you stand with your current provider and investigate what alternatives are currently available...

Pilsbury

Joined: 13 Dec 2004
Posts: 5645
Location: East london/Essex

Posted: Wed Apr 12, 06 8:59 am Post subject:

My current morgage is a 2 year fixed rate offer with early repayment penalties however i am allowed to repay up to 10%of the outstanding balance in any 12 month preiod without incuring chargesand there is no way on this planet i can overpay 10% a year so i dont have to worry,
The intrest is calculated daily and any overpayments are applied immediatly so the day they are credited is the day i start saving interest.
I guessed that easiest way to work out the monthly interest would be to take �100 then multiply it by a % and re multiply the result but the samr % 12 times and then adjust the % used untill the resut was �105.29 and the figuer i got was 0.0045%
I plugged this figure into the spreadsheet and saw the result this morning when i got my balance from the company, Over 18 months my figures are out by �100 in my favour ( spread sheet says i owe �100 more than i do) and that is accurate enough for me.
Now i can feed in any overpayments i want to make and see what approxamate change it will make for example if i could overpay by another �150 per month it would reduce my 25 year morgage to 10 years and save me �36,230.
Thats the sort of information that will make me get a second job and pour cash into the morgage.

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