Mortgage Interest Help

barry1873

Hi guys,

I've been an ardent reader of this forum for advice on my, in progress, house move but now need a bit of specific help.

I've been given a redemption statement from my current mortgage provider to close my mortgage. But I can't figure out how they've calculated the interest that i'm due to pay.

First question, on the first of the month my repayment gets taken and I get charged interest on my account. Is this interest for the preceding month or am I paying in advance for the upcoming month?

Thanks in advance!

Crashandburn

Most lenders tend to be in advance. Easy way to work this out is going back to your first payment. Did your first payment to them end up being much higher than the normal contracted payment? If so, then you are paying up front

barry1873

Thanks for your answer.

My mortgage was taken out 4 years ago so I think that I did make a large first payment. As far as I can remember anyway.

If that is the case then it makes the settlement figure confusing.

I moved out of my house on the 31st March and they quoted me the settlement figure for the 25th March.

Included in the figure is an interest payment of £421.38 and a daily interest payment of £11.74.

Now I paid my mortgage instalment on 1st March and they charged me £362.69 interest also on the 1st March. So if i'm paying up front (which I think I am) why have they hit me with this extra interest payment? And even if I'm not paying up front why is this final interest payment around £60 more than what I usually pay and why have a got a daily interest charge? :huh:

I do intend to contact them regarding this but wanted to get as full an understanding as possible before I do so.

Thanks again if anyone can help!

TrickyDicky101

When did you take the mortage out (which day of the month)?

barry1873

Wow, I genuinely can't remember!

My online mortgage account only goes back 12 months and my paper documentation is all packed away in storage just now.

I will see if I can find anything relating to this though if it may help.

Edit:

Ok, i've found an email that suggests it was the 20th April 2007 that I moved into the house so I guess this is when the mortgage started as well.

Thrugelmir

barry1873 wrote: »

My mortgage was taken out 4 years ago so I think that I did make a large first payment. As far as I can remember anyway.

Quite likely. As you would have completed your purchase part way through the month. As 10 days notice is required of taking a direct debit, and lenders normally take payments around the 1st of the month. Then you would have paid interest from the date of completion through to the end of the next complete month.

Mortgage interest normally accrues and is charged in arrears.

You should query how they arrive at the settlement figure. As does seem odd that it is higher than the previous month.

There is a daily charge as your lender assumed that the mortgage would be redeemed on the 25th but was in fact the 31st. When quoting your settlement balance. This is to assist your solicitor in making payment.

Was your mortgage on a fixed term product that has recently expired?

barry1873

Hi Thrugelmir,

Yeah, I was on a 3 year fix which expired last April. So have been paying the SVR since then.

I do also have a £195 redemption fee on the settlement figure which I was expecting but am struggling to understand the interest figure.

I had figured that since settlement was on the last day of the month no extra interest other than what I had already paid for March would be required. Are you saying that the interest that i paid in March was actually to cover February and that the interest in my settlement figure is the March interest?

thanks for your help, it's much needed!

Thrugelmir

On the 1st March your mortgage statement showed the interest charged for the period from the 1st to 28th February.

The settlement figure was from the 1st to the 24th March. On the basis that settlement was made on the 25th. The daily charge would have been applicable from the 25th to the 31st March.

Do the figures you obtained agree from the lender with those on your settlement statement provided by your solicitor?