interest only morgage

etchinghill

hi can anyone help i have a interest only morgage of £10,467.15 fixed rate at 6.14 percent from 2007 for 5 years my mounthly payement should be £57.08 i have been paying an extera £50 a mounth on this morgage since 2007 all thou the capital is reduceing by £600 a year my payements of £57.08 is not reduceing and the extera £50 is not incressing is this right

unite79

Your paymet should be changing - Is your Interest calc'd yearly - then your balance would change at teh end of the lenders financial year!

unite79

Suziemum, it is the Interst rate that is fixed, not the payment!

kriss_boy

unite79 wrote: »

Your paymet should be changing - Is your Interest calc'd yearly - then your balance would change at teh end of the lenders financial year!

Like mine.

Although my mortgage documents imply that each overpayment will 'immediately' lower the interest.

I was tempted to phone and query it because I can see my £350 overpayments arent affecting the interest.

luckyfool

It may just be the default behavious this lender is applying to peoples accounts. Generally if people make overpayments it might be because they want the mortgage to be paid off faster ... so rather than reducing the monthly payment which would act against this, they may just maintain the payment and reduce the term so you will have less outstanding at the end of your term. I'm sure you can call the lender and request that they recalculate your payments. you should also check if they calculate interest daily or at least monthly so that you benefit from your overpayments promptly.

unite79

Valid point Luckyfool, you need to stipulate that you want balance to reduce, otherwise it will be deemed to be term!

kriss_boy

The interest is £116.78 or something like that, the additional overpayment is £350.

So you would expect the each more direct debit to look like... £466.78... then £466.76.... £466.74 etc.

But I do remember Lloys mentioned its recalculated yearly, despite the terms and conditions specifically stating its impact is immediate...

If my overpayments are due to pay back £2000 by the end of the each, then thats interest on £2000 I should have really paid.

InMyDreams

unite79 wrote: »

Valid point Luckyfool, you need to stipulate that you want balance to reduce, otherwise it will be deemed to be term!

Not a valid point in the OP's case as his mortgage is interest only. The term is irrelevant to the bank's calculation of the payment.

BritRael

InMyDreams wrote: »

Not a valid point in the OP's case as his mortgage is interest only. The term is irrelevant to the bank's calculation of the payment.

Yup. I had a similar situation a few years ago; I took out an interest-only mortgage with Nationwide (over 15 years, I think). However, with regular over-payments (immediately reducing the required payment for subsequent months) I paid it off in just over two.

One thing that did annoy me however, was when I paid off extra lump sums, say 10k, it immediately came out of my Nationwide flex account, but did not come off my mortgage account for 3-5 days. So for some reason. my money appeared to be in some kind of electonic limbo. (all my other online Nationwide accounts are immediately reflected online, why not the mortgage?) When I queried this they said that they calculated it so that I did not pay extra interest for money which I effectively did not owe iyswim.

getmore4less

kriss_boy wrote: »

The interest is £116.78 or something like that, the additional overpayment is £350.

So you would expect the each more direct debit to look like... £466.78... then £466.76.... £466.74 etc.

But I do remember Lloys mentioned its recalculated yearly, despite the terms and conditions specifically stating its impact is immediate...

If my overpayments are due to pay back £2000 by the end of the each, then thats interest on £2000 I should have really paid.

This is fairly common to calculate the payment once a year(or on significant changes)

The result is that once you start overpaying your regular payment also includes a small overpayment.

Mrs_Bumble

The lender's default may be to keep the monthly payment the same unless requested to reduce it/increase it. Ask the lender.