Annual Mortgage Statement help!

sugarcoma101

Hello,

Hoping someone on here can help me with some questions on my annual mortgage statement-it's my first statement so not sure about a few things.

My mortgage is a fixed 5.79% capital and interest mortgage with RBS-fixed for two years from Oct 2009.

It says 'Opening Balance'-98,599.
Total debits-5697.88 (interest)
Total credits-5847.82 (Mortgage payments).
Closing balance-98,499.06


Now, this may be a very basic question, but I am taking the above to mean that in a year, I have only paid about a hundred quid off what I owe on my mortgage. (Subtracting opening balance from closing balance).

Am I right in that? And how is it possible that in a year I have only paid off so little off the balance?

I'm aware I may be reading this completely wrongly but I don't understand why the full amount I have paid in a year (My payments are 531 a month) is not just debited off the final balance and why some is being credited?

All help appreciated!


I'm a little worried here...

opinions4u

1. How old is the mortgage? I'm guessing 1 year.
2. What term has it been taken out over? I'm guessing 40 years.

It looks to me like there are only 11 payments in the statement period. Perhaps there's a timing issue where your 12th payment came just after the statement was produced.

Mortgages do reduce in size slowly in the early years (bigger debt = more interest) but this does gradually improve as you progress through the term.

If you think about it, £100k at 5.79% = £5,790 interest. If your payments are £531 x 12 = £6,362 then a debt reduction of around £600 in year one doesn't look wrong.

Hopefully that can put your mind at rest.

By the way, it's good that you are looking at your mortgage statement and asking questions. Too many people just assume it's all ok.

Although it's American, have a play with this link. Click on "Show Amortization Table" after you've keyed in your own details ($ for £) and it will show you how you debt reduces month by month.

sugarcoma101

Hello, yes it was one year when i got the statement in oct 2010 (catching up on paperwork now...). The term is 39 years.

The bit that I'm really confused about is why a certain amount has been debited and another amount credited...surely it should all be debited off the balance?

Just trying to get my head around it really. My goal is not to pay off the mortgage to be honest, I'll be selling on in a few years, but just want to make sure I understand exactly what is happening here.

THANK YOU!

opinions4u

sugarcoma101 wrote: »

The bit that I'm really confused about is why a certain amount has been debited and another amount credited...surely it should all be debited off the balance?

Your payments reduce the balance. The interest charged pushes it back up. Simple as that!

beecher2

the debit is the interest due, and the credit is your payments. If you pay a debt, that's counted as a credit so you're maybe looking at it back to front? You pay very little off the capital in the early years, especially if you have a long term and you've only got 11 months of payments there. Your goal should be to pay off as much as possible, as when you sell you will have less equity if you've paid very little capital

sugarcoma101

Ahhhh..now I understand

Thanks so much.

Last question, My mortgage rate is fixed for two years. Err...so what do I do in October 2011 when my two year rate ends?

redpete

sugarcoma101 wrote: »

Last question, My mortgage rate is fixed for two years. Err...so what do I do in October 2011 when my two year rate ends?

You will probably go to the provider's Standard Variable Rate (SVR) - your mortgage agreement will explain. Then you can decide whether to stay on that, get a different mortgage with the same provider or move to another provider for a different deal.

What is best depends on lots of things that we don't know, e.g.
What interest rate the mortgage goes onto when the fixed rate period ends
What the exit fees are for the mortgage then if you decide to go somewhere else or change to a different mortgage with the same provider.
What rates are available elsewhere from providers who will take you on for either another fixed deal, a tracker or some other combination.
What your circumstances are then (money in savings, income, ...).