Mortgage calculations for changing payment date

chrisdring

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I wonder if anyone can advise me on my current situation?
I am on a fixed rate mortgage with abbey. I have asked that my payment date be changed by a week. But when I received the letter with the revised amount calculated it did not make sense. I asked that they send me a brake down of the calculations, and they came out with this.
Outstanding balance x interest rate /12 months in year/ days in previous month x days charged. Basically the days in previous months was 28 (February) and I was increasing the days by 7, so therefore 35 days payment was due. Calculated from 13.02.09 to 19.3.09.

However when I put in a calculation for a standard month which they say is averaged to 30.5 days then times by 30.5 days as the calculation says, it does not match what my normal monthly payment were.

So I pay £598.05 per month
The calculation says that I should pay £740.49 for 20th as I have changed the date.
but if I put in 30.5 days x 30.5 to make a normal months payment is comes out at £573.876

So how do they calculate the 'Normal' monthly payment of £598.05 when their calculation says it should be £573.876

They say that the days in the month of February was what they used so it was 28.
However they say a standard month averages out to 30.5 and that is what they use to calculate for my normal payment, but if i change the date they use the ACTUAL days in the month???? So they are actually getting another £149.00 from me for nothing. As they state the next month payment will be normal and £589.00??

Can some one explain how this is fair? surely all calculations should be made on the same basis, they say my interest is calculated each day,therefore I should in fact be paying a different amount each month as per their calculation for me paying more for paying 7 days later!!!

Please can someone give me an address of a complaints team that deal with this because I am sure this cannot be correct or legal

getmore4less

What is the outstanding sum, the rate and term?

The extra interest should be around 7 days worth, that is what the calculation is trying to do, if on repayment your normal payment will have some capital as well so will be higher.

For interest only (repayments are slightly different that why the full details are needed)
This 7 days interest would be approx £598 * 12/52 = £138, so £736 for the full payment that month with the extra 7 days

Their slightly skewed calc gives £598 * 35/28 = £747
on a 31 day month the calculation would be £598 * 38/31 £733

The difference will be £11(ish). not £140 like you think.

There should be 2 calculations at work if on daily interest for normal payments

The normal monthly payment is based on 12 equal months to keep the payments the same.

The actual interest should be based on the number of days between payments which will be different numbers.

So some months you underpay and some you overpay, they usualy adjust the payments once a year for any slight variations this causes at the end of the year.


This new calculation is an attempt to guess the effect of moving the payment to cover 7 days extra interest, the real interest should be calculated properly and if this payment is more the capital should be reduced a bit.

Robert_Sterling_3

I hope that this helps.
The average number of days in a month in a non leap year is:-

30.4166666666666666666666666666 etc

For simplicity sake lenders often do not take your money on the date it becomes due, which is often the first day of each month, they let you pay by DD any day up to the twenty eighth. However the day payment is due they add the amount due to the outstanding capital balance. They work out how much interest should be due in the current year and then calculate the interest to be charged each day using a daily multiplier which will bring about the desired result.
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You could address your letter to "Customer Services".
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Do you think you have been overcharged or undercharged and if so by how much.
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Robert_Sterling_3

getmore4less wrote: »

The real interest should be calculated properly and if this payment is more the capital should be reduced a bit.

Exactly .....

chrisdring

Thanks, surely i should be paying less the next month, but they say that I will just go back on to a standard monthly payment of £568.00
However to test their system I have made my next payment due date for the 10th April, which is 21 days from 20th March. I am waiting to see if they do the same caluculations as I will be paying 8 days earlier, it should marry up with the overspend they are calulating for this month. If not i will not be very impressed!. And all becuase i wanted to change the date. I was never disputing the amount. What a waste of time and phone calls!! thanks for all the advise

Robert_Sterling_3

If the true due date is in fact the first of the month then when you pay what you refer to as "early" will still in fact be "late" by an permitted amount.

You will still need to make the standard monthly payment but a tad less will be interest and a tad more will be capital repayment.

Once a year the monthly repayment may be adjusted.
Some adjust the monthly payment following an interest rate charge.

This is like a storm in a teacup ...

A mountain out of a molehill ...

My mum would say "It is looking for lumps."