Interest Charged to redemption - Can this be right?

KatieHanna

Hi I am looking for some advice on our redemption statement.
We took out our mortgage 18 months ago @ approx: £172,000. This was at a rate of 5.29%. We have been paying approx: £1100 each month. Our fixed rate recently ended and we our now 7.5% paying £1250 a month.

Over the 18months we have repaid approx: £19,000.

We recently shopped around and our looking to move our mortgage to another lender, when I requested our redemption statement I was shocked to see that we still have approx: £169,000 to pay off our mortgage with them.

On basic calculations this means that in 18 months of paying £19,000 we have actually only paid off £3,000 against our mortgage and £16,000 in interest :mad: ! When I rang our provider they simply told me that this was because the ratio of what you pay in interest against repayment is higher in the beginning. If this is the case then out of our £1100 a month more than £900 has been going towards interest.

Can anybody advise - it would be greatly appreciated if I could shed some light on this and whether we've been ripped off, or whether this is just how they work????

Many Thanks

Katie

dunstonh

You dont say how long your mortgage term is but for 25+ year mortgages it is correct that you barely pay off anything in the early years.

I dont have the 1 year figure to hand but at 5.25% you would only have paid off £112 per £1000 borrowed after 5 years on a 25 year mortgage.

So, at £172k, that would be £152,736 after 5 years. So, your figure doesnt sound wrong. Although without knowing your term its hard to say.

dimbo61

Just went on the FSA website and put your mortgage amount £172,000 over 25 years at 5.29%
It gave interest only at £758.23 and repayment at £ 1,034.77 per month
On the new rate you are on mortgage £169,000 over 23 years at 7.5% its even worse ! IO £ 1,056 and repayment £1,286 each month.
Dont know if your mortgage is over 25/30 years
You have only paid off approx £230/250 a month off the balance over last 18 months
Check with lender and ask for mortgage statement

KatieHanna

Hi Dunstonh ...Thanks for the quick reply!!

unfortunately that was the answer I was hoping not to hear but thankyou for clairiflying it for me, before I became a pest to our current provider :rolleyes:

Thanks

Katie

MarkyMarkD

I am guessing that your mortgage may have had a product fee - possibly quite a large one - and that you opted to add the fee to the account rather than paying it up-front?

KatieHanna

Thanks dimbo61 again for the quick reply...yeah we started @ 25 years...i will def request statement ... and try and get my mortgage hat on

Many Thanks for the advice guys!!

KatieHanna

Hi MarkyMarkD ... Thanks for reply...Just checked with other half and he is ther was sure no product fee ... I will ask the question though as gutted about this amount.

Thanks

MarkyMarkD

£172,000 @ 5.29% = £758 per month in interest. So your balance should have been falling by around £350 a month. Over 18 months that is £6,300.

Hence why I suspect that, if your balance has only fallen by £3,000, you must have had a large fee added to the advance.

I'm not sure that any other theory holds water, unless you are actually still within a tie-in period and the settlement amount includes an Early Repayment Charge.

KatieHanna

We have just came out of the fix rate and are on 7.5% so I assume thats poss why?? I will check that out tho!!

appreciate ur time thanks

Squirreler

When we took out our mortgage, the adviser explained that at the start you pay loads of interest and a tiny bit of capital, and as the years go by you pay more capital and less interest, til you're left with a bit of capital and a tiny bit of interest right at the end.

We have a mortgage where you can overpay which takes the interest down but you can take it back out again if you want.

How disheartening for you though! The mortgage calculators which show how long you've got left when you overpay might help you feel better? I'm a bit addicted to them!