Why do First Direct repayments differ to mortgage calculator's ?

bluesofa_2

The calculator on the First Direct website gives an estimate of my monthly payments that is exactly the same as the estimate on my mortgage offer.

However, this doesn't appear to match estimates from other mortgage calculators. For example, the FSA moneymadeclear or moneysavingexpert calculators.

Can anyone explain why ?

The difference is small, but I'm curious to know why it's there at all. First Direct could only redirect me back to the calculator.

To use the First Direct Calculator for a repayment mortgage, you have to initially set an interest rate for an offset mortgage, then leave all the offset fields blank, and when you get to the results you can change the interest rate to that for a repayment mortgage. (I was told this by First Direct).

First Direct Mortgage calculator says a mortgage of 300,000 over 16 years at 2.29% would require repayments of £1869.92

Other calculators give an estimate of £1868
Or to be more precise £1867.67
which would agree with my calculation using excel's function
=PMT(2.29%/12, 192, 300000,0,0)

I assume one of the below statements from the Terms and Conditions and mortgage offer may explain the discrepancy, but I don't know which.

"We will calculate interest on the outstanding debit balance of your loan facility daily"

"Interest will be charged monthly in arrears and we will charge you one final repayment consisting of captial [their spelling mistake?] and interest on the Repayment Date."

"The mortgage is assumed to start on the 1Nov2010"

As I say the difference is small (even after I've inflated the figures from my actual mortgage offer), but I am keen to know why it is there. Any help appreciated.

GMS

Does the First Direct figure have arrangement fees added? This would make payments slightly higher.

bluesofa_2

I don't think the difference is due to arrangement fees being added to the amount borrowed.

I couldn't explain the difference by adding any combination of fees to the mortgage.

GMS

What fees does the mortgage offer show as being added? Any arrangement, valuation, admin etc?

bluesofa_2

To quote from my actual mortgage offer:

"Arrangement Fee (not refundable) - payable when the mortgage opens. £99.00
Closure Administration Fee (not refundable) - payable when the mortgage is repaid. £149.00"

We have paid separately for the valuation (£330) and have not taken any insurance with First Direct. No other fees appear to be listed in the mortgage offer.

Also from the mortgage offer

"These payments are based on a mortgage amount of £171000.
The offer assumes that the mortgage will start 01 November 2010.
186 payments at a variable rate, currently 2.29%
Monthly Payments £1094.34"

Using excel =PMT(2.29%/12, 186, 171000,0,0) = £1093.02
I estimate a monthly payment of £1094.34 if my mortgage was £171206.93, but I can't see where the £206.93 has come from.

Any help appreciated.

CLAPTON

what is 2.29% .. is it APR or simple rate or what?

Crinz

are you getting charged daily, monthly or annual interest?

have you accounted for leap years?

bluesofa_2

To quote from the mortgage offer:
"The overall cost for comparison is 2.3% APR"

While the interest rate is described as "a variable rate which is 1.79% above the Bank of England base rate, currently 0.50, for the term of the mortgage, to give a current rate payable of 2.29%."

And I guess my question is how do I use the 2.29% to get to the monthly payment of £1094.34 on £171000 over 186 payments.

I think the best clues I have are:

"We will calculate interest on the outstanding debit balance of your loan facility daily"

"Interest will be charged monthly in arrears and we will charge you one final repayment consisting of captial [their spelling mistake?] and interest on the Repayment Date."

"The mortgage is assumed to start on the 1Nov2010"

GMS

Does it give a date for the Direct Debit to come out of your bank? If so, and it differs from the 1st (offer states assumed start of 1st Nov) then it could be a partial months interest spread over the period of the mortgage.

Once mortgage completed the exact amount of interest would be known and added to the first month's 'standard' payment.

bluesofa_2

This could be it. In the covering letter it states.

"your monthly payment amount may differ to that shown on the attached offer. This is because we have based the payments on an assumed start date and monthly repayment date."

The offer states that it "assumes that the mortgage will start on 1 November 2010" and the payment date is that referred to in clause 2(i) of these terms and conditions."

From the Repayment Mortgage terms and conditions (which can be found by following the 'Legals' link at the bottom of the first direct home page, and then Terms and Conditions from the menu on the left - I still can't paste links)

"the payment date calculated by reference to the first drawdown, or such other date that we may change it to at your request."

No actual date is given. I would think it's with reference to the first drawdown - i.e. the first of the month. However, I'm not sure that explains the difference ?

GMS

First drawdown may be the day the solicitors request the funds in readiness for completion. If this was the 15th of the month for instance there would be a partial month for interest calculations.

Since they do not know the exact date I can only think there is an assumed date buried in the illustrative quote.

Once completion takes place there would be a final illustration which would show a first month of £x followed by 183 payments of £x.

If you have factored all fees into the calculation it must be something along these lines??