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What is 'Capitilised Interest'?

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I borrowed back some funds from an overpaid (Interest 0nly)mortgage last year. I paid back half of the borrowed amount in Dec. Ihave today recieved an annual statement wich shows a debit figure of £1500.00 for 'Capitalised Interest'.
There was no mention of penalties when I arranged the borrow bank, so I am baffled as to what this is for - and why I have been charged. I can find no mention of it in the paperwork!.Can anyone advise?
Thanks,
Meg.

Comments

  • ValHaller
    ValHaller Posts: 5,212 Forumite
    1,000 Posts Combo Breaker
    I suspect that when you borrowed back, your monthly payment did not go up. If this is the case, then interest is due which can be added to the amount outstanding as capitalised interest.

    To me this looks like 5% interest on 30,000 over 1 year. Does any of this resonate with you?
    You might as well ask the Wizard of Oz to give you a big number as pay a Credit Referencing Agency for a so-called 'credit-score'
  • meg00
    meg00 Posts: 221 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    Thanks ValHaller,
    Borrowed 84k in Oct, paid back 42k in Dec. Monthly payment wen up and down accordingly. Surely they would not apply a charge without making the customer aware?
    Meg
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    edited 26 January 2013 at 10:04AM
    Have you tried asking the lender?

    Was there a similar entry on last year's statement.
  • antrobus
    antrobus Posts: 17,386 Forumite
    ...
    There was no mention of penalties when I arranged the borrow bank, so I am baffled as to what this is for - and why I have been charged..

    It's the interest on your mortgage loan?

    Normally, loan account statements will have debit entries for interest charged and capitalised and credit entries for repayments received from the customer.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    whats the amount owing on the statement?

    that's the important number has that changed?

    if not the statement is just showing the interest charged which should match the payents made.
  • kingstreet
    kingstreet Posts: 39,254 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    I'm with gm4l.

    Is the interest calculated annually?

    If it is, on one day, the interest for the year will be charged to the account, then you'll pay it over the next twelve months, normally in equal instalments.

    If you make an overpayment, this will only be recognised on the next annual calculation date.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • ValHaller
    ValHaller Posts: 5,212 Forumite
    1,000 Posts Combo Breaker
    antrobus wrote: »
    It's the interest on your mortgage loan?

    Normally, loan account statements will have debit entries for interest charged and capitalised and credit entries for repayments received from the customer.
    Of course!!! All interest on interest only will be capitalised to put it onto the account.
    You might as well ask the Wizard of Oz to give you a big number as pay a Credit Referencing Agency for a so-called 'credit-score'
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