top up loan

chippie59

When I bought a flat 9 years ago I had to get a top up loan as the amount I was able to borrow from my mortgage provider was insufficient for my needs. At the moment i'm remortgaging so as to tie the two loans together.
On the top up loan I am paying 7.7% interest(fixed) on the amount I originally borrowed, every year. I borrowed £32000 and am being charged the same amount of interest £2460 for every year of the loan.
This doesn't seem right to me. Am I being legally ripped off?
Any advice/comments or thoughts on this matter would be welcomed.

broad-sword_2

I'm not sure about the calculation but compared to what our mortgage was (different sums) it seems about right. Someone who knows more than me can better advise but it sounds like the old case of paying 99% interest in the first year and then this reduces vs capital year on year. Stil the same repayments just you pay less interest as time goes on. Can you reduce the loan by overpaying?

redpete

Need to know the term of the top-up loan to work out the figures.

Are you sure the £2460 is interest, and it is the same each and every year? Your actual repayments would be the same each year but the amount of interest will drop each year (each month even).

antrobus

chippie59 wrote: »

...
On the top up loan I am paying 7.7% interest(fixed) on the amount I originally borrowed, every year. I borrowed £32000 and am being charged the same amount of interest £2460 for every year of the loan....

£2,460 is 7.69% of £32,000, so the calculation looks OK, and given that the interest rate is fixed, then it would be correct to charge you that same amount every year. Unless that is, you are actually paying the lender more than £2,460 a year, i.e. repaying the capital.

chippie59

My top up loan was for 20 years which leads me to think that after 15 years, for example, I clearly wont still owe the original £32000 so they shouldn't be charging me £2460 per year interest. I'm currently paying £4066.68 each year and have been since day one. If I was to overpay it still wouldn't make any difference.

CLAPTON

full facts always help

jonesMUFCforever

I'm reading OP's post as he did not have sufficent deposit/savings/funds to buy a flat he wanted so the lender gave him alternatives which he accepted - so what s the problem now??

bigadaj

Sounds like the OP has a loan rather than a mortgage and this works out like a car loan so the fixed rate Pprpximates to half of an apr, so apr would be 15%. Similarly payments to capital are around £1600 per year, over 20 years which gives the original sum of £32000.

Answer seems to be OP has been caught by the ar dealer trick of flat rate and not apr.