What is 'Capitilised Interest'?

meg00

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.

ValHaller

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?

meg00

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

Have you tried asking the lender?

Was there a similar entry on last year's statement.

antrobus

marygraham54 wrote: »

...
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

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

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.

ValHaller

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.