Please Please help with mortgage overpayment advice!!

HZG

I desperately need help to know where I stand at the moment. My position is this - endowment mortgage (interest only). 7 years left to go. When I got my statement at the end of 2004, the capital sum had increased by £800.00. This is not usual. Every year prior to that, the total was virtually the same.

During 2004, I fell sick and the DSS were paying my interest on the mortgage. Although the amounts they paid were often approx. £20 a month lower than the monthly sum, I knew I had 'overpaid' by about £900 previously.

I phoned the Bldg Soc. to check that a) I WAS in credit. and b) if the DSS monthly payments were less than the monthly sum, was the credit on top of the mortgage enough to cover the shortfall. I was very concerned that I didn't get into arrears.

They replied YES to both queries. I was in credit, and there was enough in there to cover any shortfall for quite a while. So when the statement said that the total amount had increased by £800.00 over the year, I wondered why.

Moreover, according to their statement, there was still a 'surplus' of £255.00 in there at Dec. 04.

It now transpires, after numerous phone calls with inept calling centre 'advisors' (it actually took 3 to explain the following to me - they kept admitting - it was very confusing .....) this is the position:::

1. When you 'overpay' your interest only mtge, it immediately decreases the capital sum ... BUT that when your monthly payments are LESS than the required amount - and you have to EAT INTO THAT SURPLUS, the capital sum then increases with interest because they take the money back again from that surplus to make up your monthly amount.

Does any of this make sense to anyone??!! Because interest is calculated on a daily basis, it meant the whole mortgage amount increased.

After 1 hr on the phone, I said this sounded like rubbish. I am just a lay person and if 3 of their advisers didn't understand it how did they expect me to?

More importantly, I feel I have totally been misinformed. They have NEVER explained any of this to me at any previous conversations. I would have certainly made up the monthly difference to keep that final balance down. They have completely misled me.

In response to my complaint, they have said (what a surprise) that they are sure their managers had made no errors and so sorry if I was upset.

I feel outraged and picked on. IT's bad enough having an endowment that won't meet the capital sum... don't even start me on that one.

Please please, can anyone help me with any advice? I'm putting a letter together for the 'complaints department' as I was advised by them, but it feels like it's going to be a long drawn out thing.

Thanks so much....

silvercar

1. When you 'overpay' your interest only mtge, it immediately decreases the capital sum ... BUT that when your monthly payments are LESS than the required amount - and you have to EAT INTO THAT SURPLUS, the capital sum then increases with interest because they take the money back again from that surplus to make up your monthly amount.

Makes sense to me.

If you overpay your mortgage, where else is the money going to go apart from paying down some of the capital? You don't owe any interest payment so it must be reducing the capital.

When you underpay, the BS has two options, either to tell you that you have arrears or to use the previously overpaid amount to balance out the underpay. Obviously its cheaper for you if they aren't putting your account into arrears and writing to you each month to tell you your payments are short.

I phoned the Bldg Soc. to check that a) I WAS in credit. and b) if the DSS monthly payments were less than the monthly sum, was the credit on top of the mortgage enough to cover the shortfall.

Both these statements are still true, so I don't actually see the problem.

Explain how you think the shortfall each month was being made up to the full amount.

silvercar

End of 2004, the year in which your monthly payments were short, your balance increased.

That is logical as each month the shortfall was taken from your balance. Presumably your balance went down by the overpayments prior to that. In 2004 each month the shortfall was made up to the full amount by adding to the capital amount. As your capital amount had previously been reduced by the overpayments, this wasn't a problem. You would therefore expect the outstanding amount owed to increase, but still be below the original amount borrowed.