Interest-only Mortgage ... increasing balance?

faisalpak

Hi I have got a 35 year interest-only mortgage with A&L. Following are the details:

Amount £250,000
Fees Added: £999

Monthly Payment: £1222.26

I have received my yearly mortgage statement and it now says my outstanding amount is £251,068.42, after two years. Looks like its going up every year by around £30.

I called A&L and the person on the other side was confused as well, and then he went away and came back with following explanation.

The monthly fixed payment you are making is based on the calculation of 30 days per month, i.e. 360 days. While the interest actually payable is for 365 days. Effectively my interest-only payment is less than what I owned.

I am quite baffled at this and not sure what has happened to me was correct and possibly a con on part of A&L. Can anyone plz shed a light if this is a correct practice?
Thanks in advance.

dwsjarcmcd

I find their expanation difficult to believe. It could be either interest on the arrangement fee or there were other charges applied at the time you set up your mortgage, for example Telegraphic transfer fees.

Have a look at your first years statement, or your original KFI, there may be some clues in one of those.

emeraldbugle

I had a similar problem. It turned out they had incorrectly calculated the very first payment and we had missed paying a telegraphic transfer fee. We paid the fee and they wrote off the difference as it was their mistake.

You are correct that the capital amount due should be 250,999.

Have you checked the interest rate you are on, on a mortgage calculator? It shows interest only.

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

dralex

Hi, I think it is a general problem with most mortgages.

I had 3 years IF interest only mortgage (£266,499.00), which has just went on to the SVR. During these 3 years the balance increased by about £100. I have phoned them and so far had not have a satisfactory answer.

It seems the problem is a) they have not got a clear understanding how things are calculated and therefore can not explain or b) deliberately withhold the information.

I have requested exact explanation how calculations were done (formulas etc.), but they just send me a letter with some kind of nonsense. I just have an impression that what we are having here is a general problem with most lenders, and they are not willing to give up easily.

I also had a similar case with C&G, but did not pursue it to the end. But now I am determent to get the answers.

I would be nice if we can share our experiences here. Or may be we can also unveil a scale of this matter.

I will wright a letter to IF soon and let you know. Keep in touch.

Alex.