Interest charged on mortgage

HopAlong

Hi guys,

I took out a mortgage with Nationwide a couple of months ago and am a bit confused with how they've calculated the interest on it so far.

The amount was for £161,075 + £400 product fee added fixed at 3.99% for 3 years (30 year term) with a monthly payment of £769.98. The money was released on the 27th of February and I chose a payment date of the 20th of each month, meaning my first payment would be higher in order to cover the 22 days of interest charged from the 27th of Feb to the 20th of March.

I made a spreadsheet to calculate the monthly balances to term, which was loosely based on the "Mortgage Repayment Calculator" by Chris Gamlin I found on this forum and it produces the same numbers as that spreadsheet, however what Nationwide has actually charged me is completely different!

Here is what I was expecting:
1st month interest earned (+ extra days) = £920.45
1st month payment = £1,141.98 [or thereabouts - didn't know if a portion of capital was to be paid too]
1st month end balance = £161,253.47
2nd month interest earned = £529.66
2nd month end balance = £161,013.15

Here is what I was actually charged according to Nationwide's online service:
1st month interest earned (+ extra days) = £510.59
1st month payment = £837.52
1st month end balance = £161,148.07
2nd month interest earned = £422.46
2nd month end balance = £160,800.55

My compound interest formula resolves to the following (and as I said produces the same numbers as Chris Gamlin's spreadsheet):
new_balance = previous_balance * POWER(1 + (0.0399/365), number_of_days_since_last_payment)

Does anyone have any ideas why the actual interest charged would be so different? Am I missing something obvious?

Thanks in advance,
HopAlong

handytips

Rate X full amount borrowed divided by 12 will give you your monthly interest payment, on a repayment mortgage this will differ slightly as some of the capital is being paid. Hope this helps you but if you are that concerned phone your lender and get them to explain this to you. I dont understand fully what you are getting at, believe me the lender will have it spot on, Its the Law.

HopAlong

handytips wrote: »

Rate X full amount borrowed divided by 12 will give you your monthly interest payment, on a repayment mortgage this will differ slightly as some of the capital is being paid. Hope this helps you but if you are that concerned phone your lender and get them to explain this to you. I dont understand fully what you are getting at, believe me the lender will have it spot on, Its the Law.

Okay, so (3.99% * £161,475) / 12 = £536, which is around about what I calculated in my first post (except I did it via daily compound interest which is how Nationwide supposedly do it). The problem is for first 1.66 months they have charged me only £510 interest, and second month they charged me only £422 interest - that's quite a bit out isn't it?

Thrugelmir

When you say "released" was this your completion date?

HopAlong

Thrugelmir wrote: »

When you say "released" was this your completion date?

That was the day before completion - the money was transferred from the lender to my solicitor the day before completion in order to make sure it went through smoothly on the day.

Cheers,
HopAlong