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  • FIRST POST
    • MikeBeirne
    • By MikeBeirne 3rd Oct 17, 9:44 AM
    • 4Posts
    • 1Thanks
    MikeBeirne
    Interest only lump sum payments and reduced repayment
    • #1
    • 3rd Oct 17, 9:44 AM
    Interest only lump sum payments and reduced repayment 3rd Oct 17 at 9:44 AM
    Can anyone explain how this works in simple terms please.
    Interest only mortgage which is fixed, figures below are rounded
    Mortgage £60000 repayment £266 pm
    I paid a lump some of 20% (£12000) off the capital which was all without penalty
    Now mortgage £48000 repayments £213 pm
    Twelve months later paid another £12000 off the capital (10% interest free plus the rest with interest)
    Now mortgage £36000 repayments £185
    So my question is for example the last lump sum payment is 25% of the remaining capital so why does my monthly repayment not reduce by 25% as well? Is there a simple answer?
    Should I have not paid the lump sums and kept the money in the bank until the mortgage end in a couple of years?
    Cheers in advance for any comments Mike
Page 1
    • TrickyDicky101
    • By TrickyDicky101 3rd Oct 17, 10:10 AM
    • 2,827 Posts
    • 1,829 Thanks
    TrickyDicky101
    • #2
    • 3rd Oct 17, 10:10 AM
    • #2
    • 3rd Oct 17, 10:10 AM
    I agree that on an interest-only basis you would expect proportionate reductions in interest charged for capital repaid (all other things remaining equal).

    Hence, are you sure no charges have been applied?
    Have you received confirmation of your outstanding balances with each repayment of capital you have made?
    Have you asked the lender?
    • kingstreet
    • By kingstreet 3rd Oct 17, 10:15 AM
    • 32,385 Posts
    • 17,392 Thanks
    kingstreet
    • #3
    • 3rd Oct 17, 10:15 AM
    • #3
    • 3rd Oct 17, 10:15 AM
    If you use the first calculation to calculate the rate, it's 5.32% pa.

    Then, on £48,000, the monthly payment at 5.32% is £212.80. Which appears consistent.

    Finally, on £36,000, interest at 5.32% is £159.60 not £185 so something has changed. Either the balance is more than £36,000 or the rate has increased.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • MikeBeirne
    • By MikeBeirne 3rd Oct 17, 10:35 AM
    • 4 Posts
    • 1 Thanks
    MikeBeirne
    • #4
    • 3rd Oct 17, 10:35 AM
    • #4
    • 3rd Oct 17, 10:35 AM
    Thank you for your comments, I will contact the lender and see what is going on. I will post their comments also
    Cheers and thanks again
    Mike
    • MikeBeirne
    • By MikeBeirne 3rd Oct 17, 2:07 PM
    • 4 Posts
    • 1 Thanks
    MikeBeirne
    • #5
    • 3rd Oct 17, 2:07 PM
    • #5
    • 3rd Oct 17, 2:07 PM
    Thinking about it, it might be that I have made the lump sum payment partway through the month so the full effect doesn't happen until next months payment. So this months payment may be half based on £48000 and the other half on £36000
    Cheers Mike
    • MikeBeirne
    • By MikeBeirne 16th Oct 17, 4:54 PM
    • 4 Posts
    • 1 Thanks
    MikeBeirne
    • #6
    • 16th Oct 17, 4:54 PM
    • #6
    • 16th Oct 17, 4:54 PM
    Yes, because I paid the lump sum midway between usual standing order dates the interest is also split. Next months payment is around £160 which is what I expected as the new monthly payment.

    Cheers Mike
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