Mortgage Payments Calculation Help

surpoob

Can someone please help?

I have recently paid a substantial amount off my mortgage and in advance of doing this I calculated what I expected my new monthly payments to be using various calculators and spreadsheets on the net. Based on the following I calculated my payments to be £662.78/month

Interest Rate 5.34%
Mortgage £104621.23
Remaining Payments 273 months

However my mortgage company (Post Office/Bristol and West/Bank of Ireland) have calculated my payments to be £669.19

I have asked them to check the payments and they confirmed that they haven't made a mistake.

Can anyone explain the difference in the calculations?

delmar39

surpoob wrote: »

Can someone please help?

I have recently paid a substantial amount off my mortgage and in advance of doing this I calculated what I expected my new monthly payments to be using various calculators and spreadsheets on the net. Based on the following I calculated my payments to be £662.78/month

Interest Rate 5.34%
Mortgage £104621.23
Remaining Payments 273 months

However my mortgage company (Post Office/Bristol and West/Bank of Ireland) have calculated my payments to be £669.19

I have asked them to check the payments and they confirmed that they haven't made a mistake.

Can anyone explain the difference in the calculations?

Are you on a fixed rate mortgage? If so, OPs will not make a difference to your monthly payments as they are fixed from the time you take out the fixed rate product. When your fix comes to an end, your monthly payments will reduce in line with your new product. If not on a fixed then I've no idea!

surpoob

delmar39 wrote: »

Are you on a fixed rate mortgage? If so, OPs will not make a difference to your monthly payments as they are fixed from the time you take out the fixed rate product. When your fix comes to an end, your monthly payments will reduce in line with your new product. If not on a fixed then I've no idea!

The rate is fixed but I am allowed to pay off 10% of the balance annually so they have reduced my payments but just not as much as I would have thought.

Jonbvn

delmar39 wrote: »

Are you on a fixed rate mortgage? If so, OPs will not make a difference to your monthly payments as they are fixed from the time you take out the fixed rate product. When your fix comes to an end, your monthly payments will reduce in line with your new product. If not on a fixed then I've no idea!

That's not true! Fixed rate mortgages have a fixed interest rate only. Most allow some overpayment, which will reduce either the monthly payment amount or the term of the mortgage.

RenovationMan

Just ring your mortgage provider and they'll tell you straight away where you're goign wrong with your calculations. It might be that some of your OPs have been marked as reducing the mortgage repayments and some are reducing the mortgage term.

surpoob

RenovationMan wrote: »

Just ring your mortgage provider and they'll tell you straight away where you're goign wrong with your calculations. It might be that some of your OPs have been marked as reducing the mortgage repayments and some are reducing the mortgage term.

I have tried emailing them and phoning them. They haven't responded to my email. I have spoken to several people on the phone - the first thing they usually do is laugh assuming I have made a mistake and they couldn't get it wrong. Then when I ask how they calculate it they don't know and just say they will email the operations department who will write to me. The letter I have received confirms they have reduced the mortgage amount and not the term but doesn't show any calculations.

laurasavon

Do you know when the interest is calculated - daily / monthly / annually as that could make a difference

surpoob

laurasavon wrote: »

Do you know when the interest is calculated - daily / monthly / annually as that could make a difference

Sorry I don't know. I have asked because I thought this may be the issue but not got a straight answer yet.

Do you know exactly how this effects the calculations?

laurasavon

I'm guessing if they have changed your payment that they have re-calculated the interest but if you paid mid month there may have been the interest to be added for the firss part of the month which could account for the few pence difference

surpoob

laurasavon wrote: »

I'm guessing if they have changed your payment that they have re-calculated the interest but if you paid mid month there may have been the interest to be added for the firss part of the month which could account for the few pence difference

I have done some more calcs using this using info from Wentworth FS site.

I've decided that my interest in calculated annually for normal monthly payments but when I make an overpayment they recalculate the new payment amount immediately. I think your right about the slight discrepancy being because my overpayment was mid month.

I have just checked my mortgage documentation and it seems to suggest that my mortgage interest is calculated annually (although it is not explicit). It states that if I made regular overpayments by standing order then repayments would only be recalculated at thw end of the financial year.

I guess I should have paid more attention at when I took the mortgage out. I only got the mortgage just over 2 yrs ago. Does anyone know if mortgage companies are required to state if interested is calculated daily/monthly/annually?

getmore4less

It is common for the payments to be fixed for a year, and adjusted at year end, some also recalculate at a signiicant event like overpayment or interets rate changes.

In you case to reduce admin costs they don't do the adjustments or paments by SO. but probably calculate the interest daily/monthly

The actual interets is commonly calculated daily or monthly, and paid by the monthly payment any surplus coming off the capital, some add the interest on a different day to the payment so you can see the ballance change up when the interest is added then go down when the payment is made.

The exact method of calulating the payment and interest does vary so not all calculators will match the lender way of doing it. http://www.whatsthecost.com/mortgage.aspx

for your numbers
Interest Rate 5.34%
Mortgage £104621.23
Remaining Payments 273 months.

I get £663 so same as you.

Using the lenders number it brings the term down to 268months

It might be worth looking back a the previous years statements to see if thay match what the calculatos give