changing to interest only has ended up costing me £1000.00

parc77

I'm new to this forum thing and don't know if anyone out there can help at all ...
basically I changed my mortgage from repayment to interest only (but stayed with the same lender and am still within my fixed period) I was promised I would not be charged anything in doing so but when the transfer went through the bank added about 1000.00 in what they are calling accrued interest. Is this lawful and fairplay?

happybroker

it doesn't sound right to me, who is the lender?

make a formal complaint (sent in writing by recorded delivery) and refer to your telephone conversation noting with whom you spoke on what date so that they can listen to the call again. They should at least tell you clearly how this figure was arrived at and how the interest accrued in the first place.

Trying_to_be_good

Just a thought - did you change to Interest Only as you were struggling with monthly repayments? Did you miss any? It could be interest accrued for arrears on the mortgage.

parc77

i changed to interest only because my partner was about to go on mat leave - so we were predicting a drop in income. I didnt miss any payments (as in forget to make a payment) there may have been a gap in the crossover - but at no point was I told 1000.00 was going to be added until i saw the redemption figure.

The lender is HSBC and they are being very sketchy about what this figure is for - the latest story is its interest accrued.

I am not even sure who to address this complaint to as my branch seem completely incompetant!

begbeer

It would have been on the amount outstanding and the diference in your payment dates, say your repayment date was 1st of the month but your interest only one was the 18th you would be charged interested on the amount outstanding for between those dates.
It nearly allways happens when you take out a new mortgage no matter what type as their is nearl;y always a gap between 1st payment and money realized

opinions4u

The key, if you've gone on to interest only but maintained all your payments, is what is happening to the debt.

I don't know how HSBC work things out but most lenders will calculate interest daily and add it annually.

It is possible that you were part way through the year, made a structural change to your mortgage, so interest was added at that point. But your debt would still have been lower than at the start of that financial year if all your payments (on a repayment mortgage) had been made.

Then your interest only payments kick in. Now your debt should appear to reduce month by month until the next interest is debited to your account. At that point the interest should more or less equal the payments that you've made while on interest only. This will then mean your debt equals the same as it did on the day you moved on to interest only.

As I say, I don't know how HSBC does things, this is just a theory!

I'd be surprised if you've been ripped off. It's most likely that the way the staff are communicating with you isnt helping you to understand what is going on.

Cashwitch

This thread has worried me as I've done the opposite - changing to a repayment from interest only with the same lender...It will kick in in September...I wonder if we can now expect to be hit by a charge???

CLAPTON

some facts would help
amount of loan outstanding
APR of the loan
monthly payment before interest only change
date of last 'normal' payment
date of first new 'payment'
new monthly payment

Wutang_2

Cashwitch wrote: »

This thread has worried me as I've done the opposite - changing to a repayment from interest only with the same lender...It will kick in in September...I wonder if we can now expect to be hit by a charge???

Well, definitely don't ring your lender and ask

maveli

I too changed to interest only and noticed something strange going on. It was my understanding that the capital will remain same on IR only. But I can see it going up and down. Some months it shows around £150.00 more than what I start with and some months it is £10.00-20.00 less.

Cashwitch

Wutang wrote: »

Well, definitely don't ring your lender and ask

Too late, I did.I asked them this evening for a categorical response and they said there will be NO charges...eg accrued interest, no other hidden charges...whatsoever - the payments will literally change from the current payment amount in August (variable interest only) to the new payment amount (fixed rate repayment) from September.And what's more, they also told me they've lowered the rate since we signed for the fixed rate 2 weeks ago to almost 1% less, and would we like to take advantage of this new offer (exactly the same product; same conditions)?Umm...yes!Result.And if they offer an even lower rate for this product before September, we can cancel our existing offer again and take advantage of any further reductions for the product we've chosen!