Interest on offset mortgage

K_and_N

Hi,

Does anyone know how the interest on offset mortgage is calculated?

I just started 3.75% offset mortgage on £87660 and I just saw on my online statement £35.84 interest. They said it's one day interest.

I just want to check how exactly the interst is calculated.

Thank you.

K&N

Thrugelmir

Calculate the amount of earnt interest on the balance held in your offset account.

So the balance , times 3.75%, divided by 365 , times the number of days in the period.

For example you have a £1,000 balance in your offset for March,

£1,000 * 3.75 / 365, * 31 = £3.18p interest earnt.

I assuming that your interest is calculated monthly on the offset.

getmore4less

depends on the lender I think most calculate daily, compound monthly

so they accumulate the interest daily and add it to the balance monthly.

Some might compound daily anyone know?

The daily rate will depend on which method is used.

Jonbvn

getmore4less wrote: »

Some might compound daily anyone know?

AFAIK, no lender compounds daily. It is mostly monthly compounding.

Coveredinbees!!!!

I wish I knew my interest goes up and down like a yo-yo even thou the overall balance reduces each month.

Thrugelmir

getmore4less wrote: »

depends on the lender I think most calculate daily, compound monthly

so they accumulate the interest daily and add it to the balance monthly.

Some might compound daily anyone know?

The daily rate will depend on which method is used.

Offset interest won't be compounded daily.

Thrugelmir

Coveredinbees!!!! wrote: »

I wish I knew my interest goes up and down like a yo-yo even thou the overall balance reduces each month.

Different number of days in a calendar month for interest calculation purposes.

K_and_N

Thank you everyone. I'm hoping this is not one day interest but 4.

K and N

gingefam

Hi - am in similar position. Just to be clear - for calcuation terms the "balance" you refer to is equivalent to the loan minus any savings if a non-CAM offset ? Thanks.