Miscalculation of monthly repayment

dkp_2

Hello everybody, I need some help please!!
I started an interest only mortgage in 2004 (for a sum of approx £240000) but by the end of 2005 I realised my mistake and converted to repayment mortgage. Then again I found out by the begining of this year that the bank was still deducting interest only and my capital has not changed at all. When I contacted them they accepted their mistake and said that there is a shortfall of approx of £6000 and that they are not going to ask me to make up this shortfall though the balance will be reduced by that amount. They want me to sign a paper if this offer is acceptible to me. I do not know what to read out of all these; being financially naive, I will need your suggestions what to do about this. Many thanks, DKP

silvercar

If I understand what you are saying, they are offering to knock £6,000 off the mortgage because they forgot to take the money off you?????

If I've got it right I would bite their hand off to accept.

dkp_2

Thanks, I am surprised by the content of the letter too. It says that it was a oversight on their part and will put the mortgage in the position it would have been and they will not ask me to make up this shortfall. So it will be effective from Dec 2005 and reduce my balance by that amount!!

sarah_elton

I agree, if silvercar and I have read that right, do it! And which bank is this? I might switch...

silvercar

dkp wrote:

Thanks, I am surprised by the content of the letter too. It says that it was a oversight on their part and will put the mortgage in the position it would have been and they will not ask me to make up this shortfall. So it will be effective from Dec 2005 and reduce my balance by that amount!!

Hold on!

This could mean they will not charge you the back interest ie they will not expect you to make up for the interest on the £6,000.

If you are on an interest only mortgage that is the only difference. If you are on repayment mortgage, the actual amount repaid in the first years is small as most of the payments are interest.

That sentence could mean anything! I did think the setllement offered was generous so I would check out what they mean.

sarah_elton

Good point, but if the end result is you end up where you would have been at this point without their mistake, I think it's a perfectly fair offer.

I assume you weren't checking your mortgage payments over the period or you would have noticed that you weren't paying enough for it to have switched from interest only to capital repayment.

There's a mortgage repayment calculator here, which will give you repayments (with an interest only option) so you should do some sums and work out exactly what they're offering:

http://money.guardian.co.uk/calculator/form/0,,603156,00.html

(Put in the original loan amount and term)

Do some sums, and get your head around the figures before talking to them about it.