Mortgage query

[Brother D]

So going through a friends financial affairs, and came to her mortgage payments.

Put the details into my excel spreadsheet, and the dates don't add up.

Original principle is 185k over 21 years at fixed 6.35 taken out in Mar 2007 - as you would expect pays approx 1366 per month on a repayment, which matches my calcs.

However my calcs show she should owe 150k odd after 5 years. - her bank shows the principal owed as 176k? (p.s. this is using cumprinc function etc).

Can a bank allocate a interest payment portion of monthly payments to the interest than principle per month/year for a particular APR?

Principal Interest Total Paye Balance
For 2007 3,944.02 9,723.03 13,667.05 181,555.98
For 2008 5,015.98 11,384.49 16,400.47 176,540.00
For 2009 5,343.93 11,056.54 16,400.47 171,196.07
For 2010 5,693.32 10,707.15 16,400.47 165,502.74
For 2011 6,065.56 10,334.91 16,400.47 159,437.19
For 2012 6,462.13 9,938.34 16,400.47 152,975.06

I've not seen a mortgage payment like this before and there has been no change in APR or insurance payements added (checked statement)

Thanks in advance

[fandango_c]

Your calculations reasonable. And The monthly payment seems about right.

There is something else going on. I.e. loan has been increased at some point or your initial assumptions are wrong. Can you get hold of the account from the mortgage company?

Not sure what you mean by no change in apr (interest rate perhaps?) or insurance payments.

[Sarnie]

I've just produced a KFI to replicate these figures (6.39% was the closest rate I could find but close enough) and the balance at the start of year six should be approx £162k give or take a few quid.

The most plausible explanation I can assume is that the term is longer than 21 years therefore less of her monthly payment has been capital or the mortgage is not on full repayment, but then her payment would be lower than it is.

Something out of the ordinary has happened;

Has she borrowed extra?
Has she ever changed to Interest Only for a period?
Has she ever taken a Mortgage Holiday for an extended period of time?

[NorthDave]

I know very little about this type of stuff but is it not the case that you pay back the interest element first and then the capital?

[CaptainSlow]

My calcs show a MI of £1,331 and a year 5 end position of £160.2K.

Are there any fees added to the £185K?

eta

I did the above using the pmt function on a monthly flow

I have also done the same on the cumprinc using the following:

=185000-cumprinc(6.35%/12,21*12,185000,1,60,0)

How do we differ?

Edited by CaptainSlow on Wednesday 16th May 10:37

[Sarnie]

The OP's figures are actually for 70 payments. 10 in 2007 and then 60 across 2008,2009,2010,2011 & 2012.

[CaptainSlow]

ok after 70 months

My calcs show a MI of £1,331 and a month 70 end position of £155.3K.

Are there any fees added to the £185K?

eta

I did the above using the pmt function on a monthly flow

I have also done the same on the cumprinc using the following:

=185000-cumprinc(6.35%/12,21*12,185000,1,70,0)

How do we differ?

[Sarnie]

The loan is not 70 months old though, even though the OP has used 70 months in his calculations.

If the loan was started in March 07 then it is 5 years two months old, therefore 62 payments.

Either way, there is something within the OP's figures that does not stack up.

If the loan was taken over 35 years then the balance would be approx £177k......

To the OP, are you taking these figures from her actual mortgage statements or just the figures given to you verbally?

[Brother D]

(The first year was only calulated for 9 months), and subsequent figures are at the end of each year.

She has never over or under borrowed - it was just a direct debit at 1366 per month.

The orignal amount I've since found out was for 185576, and she's certain it was for 21yrs rather than 35yrs.

I only have last months statement which shows principal remaining of 176K

I've asked her to get together the orignal paperwork, but putting the info in a couple of on-line calculators, it still comes out at around the 150K mark rather than 176 remaining on the principle.

I think she'll have to do some more digging, but I don't think anyone disagrees that with the figures given the principle doesn't look right for the time she has had it?

[Sarnie]

Brother D said:

(The first year was only calulated for 9 months), and subsequent figures are at the end of each year.

She has never over or under borrowed - it was just a direct debit at 1366 per month.

The orignal amount I've since found out was for 185576, and she's certain it was for 21yrs rather than 35yrs.

I only have last months statement which shows principal remaining of 176K

I've asked her to get together the orignal paperwork, but putting the info in a couple of on-line calculators, it still comes out at around the 150K mark rather than 176 remaining on the principle.

I think she'll have to do some more digging, but I don't think anyone disagrees that with the figures given the principle doesn't look right for the time she has had it?

They look exactly right if the term was actually longer than 21 years, but then the payment would have been less. I was even thinking that she may be on a split mortgage, but again, the payment would be less.

The balance should be circa £160-£162k now, not £150k. But no where near £176k.

There is an anomoly somewhere...... it's even bugging me!

[fandango_c]

Brother D said:

(The first year was only calulated for 9 months), and subsequent figures are at the end of each year.

She has never over or under borrowed - it was just a direct debit at 1366 per month.

The orignal amount I've since found out was for 185576, and she's certain it was for 21yrs rather than 35yrs.

I only have last months statement which shows principal remaining of 176K

I've asked her to get together the orignal paperwork, but putting the info in a couple of on-line calculators, it still comes out at around the 150K mark rather than 176 remaining on the principle.

I think she'll have to do some more digging, but I don't think anyone disagrees that with the figures given the principle doesn't look right for the time she has had it?

Given the interest rate, initial loan and monthly payments (to pay of the specified load) your calculation for the amount outstanding is roughly correct.

Given the actual amount outstanding, either one of the three assumptions above must be incorrect or an additional amount must have been borrowed, or a mistake has been made by the bank.

[Brother D]

fandango_c said:

Given the interest rate, initial loan and monthly payments (to pay of the specified load) your calculation for the amount outstanding is roughly correct.

Given the actual amount outstanding, either one of the three assumptions above must be incorrect or an additional amount must have been borrowed, or a mistake has been made by the bank.

K so for those interested, got the paperwork through... Turns out she elected to make an additional 170 a month payment, that is held for any taxes... And with that makes the figures work (i.e. 1166 a month, not 1336 as appears on statement).

Thanks for the input - goes to show the difference making additional contributions can have at least...

[456GT]

Brother D said:

Turns out she elected to make an additional 170 a month payment, that is held for any taxes...

What does that mean? The bank is just holding on to the money without taking it off the principal? What taxes is it being held for? Why can't your friend hold it her own account (and accrue the interest)?