Got my first mortgage statement through today...
Discussion
And it went like this…
Amount borrowed, lets call it £X
Arrangement fee, lets call it £Y
Monthly repayments of £Z all shown to date - so far, as expected.
It’s a straight forward repayment mortgage which is fixed rate for the first 3 years. My understanding of it was that the monthly repayments were split up into an amount of interest (big) and an amount of loan repayment (not so big) every month.
If this is the case why then have I also been charged a not inconsiderable amount of ‘interest’ in January this year (over £4k) so that I am now in (slightly) more debt than when I started? Anyone?
Amount borrowed, lets call it £X
Arrangement fee, lets call it £Y
Monthly repayments of £Z all shown to date - so far, as expected.
It’s a straight forward repayment mortgage which is fixed rate for the first 3 years. My understanding of it was that the monthly repayments were split up into an amount of interest (big) and an amount of loan repayment (not so big) every month.
If this is the case why then have I also been charged a not inconsiderable amount of ‘interest’ in January this year (over £4k) so that I am now in (slightly) more debt than when I started? Anyone?
The repayment of the interest is included in the payments you are making, but the interest still needs to be charged to the account, many do this on an annual basis, either January or December, you may well owe more now if you have not made a full 12 months of re payments yet.
Don't expect to see any real reduction in the amount you borrowed for a good few years yet, unless to start making overpayments.
Programmes like Microsoft Money will show you how the mortgage will decrease over the whole term.
Don't expect to see any real reduction in the amount you borrowed for a good few years yet, unless to start making overpayments.
Programmes like Microsoft Money will show you how the mortgage will decrease over the whole term.
Edited by LittleMiss on Thursday 15th October 09:22
It should not be possible for your debt to increase.
Check that your payments all appear on the statement, that nothing else was added to the loan - arrangement fees etc.
If there are no anomalies then call the lender and ask what is going on. Get them to check the rate they are applying to the capital sum is the one agreed, and the one your payments have been calculated from.
Check that your payments all appear on the statement, that nothing else was added to the loan - arrangement fees etc.
If there are no anomalies then call the lender and ask what is going on. Get them to check the rate they are applying to the capital sum is the one agreed, and the one your payments have been calculated from.
Hmm, ok, picking up on a couple of points....
- I HAVE made payments in full every month, they appear as expected on the statement.
- There was an arrangement fee, but that was expected and budgeted for.
- They (lender) have added a line on the statement in January this year simply stating 'interest', value - just over £4k.
Without this 'interest' my 'amount due' figure would have dropped by somewhere in the region of £3-4k in accordance with the mortgage illustration we got before accepting the mortgage.
As you can imagine, I agree it seems wrong having made all the payments on a fixed rate product I am now due more than when I began.
- I HAVE made payments in full every month, they appear as expected on the statement.
- There was an arrangement fee, but that was expected and budgeted for.
- They (lender) have added a line on the statement in January this year simply stating 'interest', value - just over £4k.
Without this 'interest' my 'amount due' figure would have dropped by somewhere in the region of £3-4k in accordance with the mortgage illustration we got before accepting the mortgage.
As you can imagine, I agree it seems wrong having made all the payments on a fixed rate product I am now due more than when I began.
Have they calculated the interest charge in accordance with the terms of the fixed rate deal?
Whatever, the amount, every year you will see this Interest Amount being added on to the balance due every year. That is the way it is displayed and is perfectly normal. The dispute is not the layout, but the amount of interest being charged, surely?
Whatever, the amount, every year you will see this Interest Amount being added on to the balance due every year. That is the way it is displayed and is perfectly normal. The dispute is not the layout, but the amount of interest being charged, surely?
Eric Mc said:
Have they calculated the interest charge in accordance with the terms of the fixed rate deal?
I can't see how they have, but will check the T&C's carefully when I get home.Eric Mc said:
Whatever, the amount, every year you will see this Interest Amount being added on to the balance due every year. That is the way it is displayed and is perfectly normal. The dispute is not the layout, but the amount of interest being charged, surely?
So if I'm interpreting correctly...I take out a mortgage on a fixed rate for 3 years, I pay back a combination of interest & capital every month, strictly NOT an interest only payment.
However after having paid my interest & capital for the 1st year they then add yet more interest to the original amount so that I'm due more now than I was at the beginning - how am I supposed to pay this off? Don't really want to make much of an overpayment - other priorities at the moment, what to do?
Have interest rates not fallen anyway since I took out the mortgage in Oct '08?
Edited by Polrules on Thursday 15th October 13:02
Polrules said:
I take out a mortgage on a fixed rate for 3 years, I pay back a combination of interest & capital every month, strictly NOT an interest only payment.
However after having paid my interest & capital for the 1st year they then add yet more interest to the original amount so that I'm due more now than I was at the beginning - how am I supposed to pay this off? Can't really afford to make much of an overpayment, what to do?
Have interest rates not fallen anyway since I took out the mortgage in Oct '08?
Something is definitely not right here. However after having paid my interest & capital for the 1st year they then add yet more interest to the original amount so that I'm due more now than I was at the beginning - how am I supposed to pay this off? Can't really afford to make much of an overpayment, what to do?
Have interest rates not fallen anyway since I took out the mortgage in Oct '08?
Would you be able to post the statement up on PH (after applying an x multiplication factor to the all the figures so that we won't all know what the size of your mortgage is)?
This should help us work out if there's a simple explanation for it.
Polrules said:
Have interest rates not fallen anyway since I took out the mortgage in Oct '08?
You are on a fixed rate so that doesn't matter. Are there the full 12 payments shown on the statement?
Are they showing you the next months interest prior to you paying it?
ETA, its not a redemption amount factoring in ERC's that you have no intention of paying is it?
Edited by scotal on Thursday 15th October 13:29
Polrules said:
Eric Mc said:
Have they calculated the interest charge in accordance with the terms of the fixed rate deal?
I can't see how they have, but will check the T&C's carefully when I get home.Eric Mc said:
Whatever, the amount, every year you will see this Interest Amount being added on to the balance due every year. That is the way it is displayed and is perfectly normal. The dispute is not the layout, but the amount of interest being charged, surely?
So if I'm interpreting correctly...I take out a mortgage on a fixed rate for 3 years, I pay back a combination of interest & capital every month, strictly NOT an interest only payment.
However after having paid my interest & capital for the 1st year they then add yet more interest to the original amount so that I'm due more now than I was at the beginning - how am I supposed to pay this off? Don't really want to make much of an overpayment - other priorities at the moment, what to do?
Have interest rates not fallen anyway since I took out the mortgage in Oct '08?
Edited by Polrules on Thursday 15th October 13:02
You borrow £100,000.
The monthly payments are £700.
Each £700 payment is made up of £650 Capital Repayment and £50 Interest.
In the first year you pay into the mortgage 12 monthly amounts of £700 (£8,400 in total i.e. £700 x 12).
Therefore you have repaid £7,800 Capital(£650 x 12) and have been charged £600 Interest (£50 x12) - which totals £8,400, of course.
This means that, at the end of year 1, you owe £92,200 on your mortgage (£100,000 less the £7,800 capital repaid).
How does this look on a typical mortgage statement?
Opening Balance - £100,000.00
Less:
Repaid in Year
£700.00 x 12 £8,400.00
Plus:
Interest Charge
for year £600.00
Closing balance £92,200.00
Well thanks all for the input.
As an explanation of what's happened to date,
- I borrowed amount £X overall.
- I have repaid amount £Y x12 monthly instalments (will check once I get home to make sure they are all visible), which I understand to be broken into £Yi - interest payments, and £Yc - capital payments.
- I expected that my 'total due' figure £X would diminish to the tune of £Yc x12 which to me seemed a reasonable assumption and matches the example above. The £Yi x12 amount I had written off as interest payments.
- My statement however shows my 'total due' figure to now be in excess of my borrowed amount.
- There is an unexplained entry on my statement that simply states 'interest' and has been added to my 'total due' figure bumping it over the original amount borrowed. This is the part I don't understand and will speak to my lender tonight if I can get them on the phone.
Will post back if I find anything out.
As an explanation of what's happened to date,
- I borrowed amount £X overall.
- I have repaid amount £Y x12 monthly instalments (will check once I get home to make sure they are all visible), which I understand to be broken into £Yi - interest payments, and £Yc - capital payments.
- I expected that my 'total due' figure £X would diminish to the tune of £Yc x12 which to me seemed a reasonable assumption and matches the example above. The £Yi x12 amount I had written off as interest payments.
- My statement however shows my 'total due' figure to now be in excess of my borrowed amount.
- There is an unexplained entry on my statement that simply states 'interest' and has been added to my 'total due' figure bumping it over the original amount borrowed. This is the part I don't understand and will speak to my lender tonight if I can get them on the phone.
Will post back if I find anything out.
What was the interest element of each monthly payment?
In theory, the overall annual interest charge should be the same as those interest elements added together.
How does the total of the 12 individual interest amounts added together match against the single interest charge they are showing on the statement?
In theory, the overall annual interest charge should be the same as those interest elements added together.
How does the total of the 12 individual interest amounts added together match against the single interest charge they are showing on the statement?
(I've never had a mortgage where interest was added once a year so I might be making the following up)
If it's the first mortgage statement sent one year after the mortgage was taken out, then would there not be a smaller interest amount added at the start to cover the time from when the mortgage was taken out through to the end of 2008, then the interest for all of 2009 added this January, so the OP is seeing about 14-15 months of interest added to their outstanding balance in this case, but wont in future years?
If it's the first mortgage statement sent one year after the mortgage was taken out, then would there not be a smaller interest amount added at the start to cover the time from when the mortgage was taken out through to the end of 2008, then the interest for all of 2009 added this January, so the OP is seeing about 14-15 months of interest added to their outstanding balance in this case, but wont in future years?
I suspect this is due to the statement being drawn down in October, the aniiversary of when you took the mortage out, as opposed to the end of the year, December 2009 if the interest was charged in January 2009.
If you take off November 09 and December 09 payments, does that bring the outstanding amount more in line with what you were expecting?
If you take off November 09 and December 09 payments, does that bring the outstanding amount more in line with what you were expecting?
Evening all,
Just got home and checked my statement carefully, done my sums and feel like a first class f
kwit. My October payment is not considered so I am actually roughly where I should be, thanks to all who took the time to reply. Away off to have a stiff drink.
Littlemiss - you are awarded the gold star for being right.
God bless PH.
Just got home and checked my statement carefully, done my sums and feel like a first class f
kwit. My October payment is not considered so I am actually roughly where I should be, thanks to all who took the time to reply. Away off to have a stiff drink.Littlemiss - you are awarded the gold star for being right.
God bless PH.
Edited by Polrules on Thursday 15th October 17:50
Gassing Station | Finance | Top of Page | What's New | My Stuff