Interest Only Mortgage confusion

hope_springs_etc

Hi, I'm confused about my interest only mortgage! The interest rate is static but the capital amount to pay off has gone up in the last month by £85. How can that be? I pay the monthly interest payment without fail, never missed etc. I'm thinking of making a small one off payment to reduce the capital sum, but if the capital amount increases am I wasting my time?

property.advert

Have you telephoned the lender ?

Wh05apk

The balance will never remain static to the penny, it will always fluctuate by a few pounds, depdending when in the month your ddr goes through, was it late due to bank holidays etc.

Just reread, noticed you said it has gone up by £85 in the last month? have they applied any charges? do you pay by ddr or sto?

getmore4less

Whats the mortgage size and rate?
Whats your normal monthly payment and when do you make it?
Do you know how your lender applies interest?

hillcats

I trust you realise that as it is interest only you are never clearing the capital (actual debt) itself?
What plans do you have to repay the loan?

hope_springs_etc

Hi all. In answer to a few of your follow on questions:
No, haven't phoned the lender yet.
Yes, I do realise I need to make provision for paying off the capital.
Yes, I pay by DD. Its a Woolwich (Barclays) mortgage, I now owe £139,085 (was £139,001 last month) and I pay £92/month on 16th of every month.
I'm not sure how the interest is applied.
No charges are applied.

I get the impression that its odd for it to go up by £85 in a month so I'll contact Barclays anyway, I just wondered if there was some bizarre accounting convention that I wasn't aware of.

HappyMJ

£92 per month is very very low. It implies an interest rate of 0.79% per annum. I'd start paying more. A lot more. As much as you can. Or save elsewhere. You may have had 2 lots of interest applied to the account in 1 month but only 1 credit to the account.

hope_springs_etc

Thanks HappyMJ, you're spot on for the rate, the downside is that I also have a separate repayment element which doesn't have such a good rate and I'm focussing on paying that down as my first priority.

getmore4less

hope_springs_etc wrote: »

Hi all. In answer to a few of your follow on questions:
No, haven't phoned the lender yet.
Yes, I do realise I need to make provision for paying off the capital.
Yes, I pay by DD. Its a Woolwich (Barclays) mortgage, I now owe £139,085 (was £139,001 last month) and I pay £92/month on 16th of every month.
I'm not sure how the interest is applied.
No charges are applied.

I get the impression that its odd for it to go up by £85 in a month so I'll contact Barclays anyway, I just wondered if there was some bizarre accounting convention that I wasn't aware of.

This is an easy one.

Barclays add the interest at the end of the month so it appears on the 1st.(daily accumulation added monthly so it is not the same every month)

Payment is on the 16th based on an estimate at the mortgage accounting year end was changed anualy but they now change on a interest rate change as well(Oct annual statement).

All explained in the T&C's.


DO NOT OVERPAY, save it in savings accounts they pay more interest than you are paying.