Have the bank got it right?

Thrifty_2

I re-mortgaged my house back in August 2004 for a term of 21yrs for 51K, I am now in the process of re-mortgaging again June 2006 for £46.800 hence the bank say I have paid 22 months off my mortgage which leaves a new mortgage term of 19yrs 2 months i agree with that in principle
i have been paying the contracted repayments every month @ 0.85% above BBBR and I have never reduced my payments I have however made overpayments of £1.060 cash, plus £377 earned in offset interest this is reflected in the above amount of £46.800 so surely those overpayments should reduce my mortgage term more than what the bank say, am I correct to say that? or am I missing something

silvercar

I would guess that the overpayments and offset have been used to reduce the capital now owing rather than the term.

Your new payments ould be calculated on the basis of a mortgage of £46,800. If you kept the repayments at the level of a £51k mortgage, you would indeed pay you mortgage off in a shorter term.

Robert_Sterling

Yes the bank has got it right.

Joe_Bloggs

The figures on the capital look about right. The term would have probably have shortened by 8 months by the overpayments. The term is a flexible indicator when overpayments are allowed.
There was a BofE interest rate cut in August 2005 from 4.75% to 4.5%. The timing of overpayments also makes a difference but It is easier to assume they were made at the mid point of this short mortgage.
I do not understand money 'earned in offset interest'. If this money went towards capital repayments, in the end, then all is fine.
J_B.

Thrifty_2

Hi J B
Yes money earned in offset interest did go towards capital repayments.