Mortgage redemption question

Road_Hog

Please I need help, either Direct Line no nothing about mortgages or I'm having a senior moment.

I'm selling a house and phoned DL for a redemption figure. Now I'm nor interested in exact calculations here, just the logic behind it, I'm going to use rough figures for ease.

I have a bog standard 25 year capital repayment mortgage (4%) with about 6 years left to run. It is about £390 pcm of which currently about £300 is capital repayment and £90 is interest. The amount to be repaid if I were to continue for the full period would be circa £27K.

I've asked two different CS reps at DL what would the redemption figure be, as of today and they insist that it is £27K. I've tried to explain that that is the cost of the full term of the mortgage and includes interest, but if I redeem early the figure should be lower. They have both insisted not.

Am I missing something, this doesn't seem logical?

Let_Us_See

DL has confirmed your current mortgage balance is £27,000 with remaining term of approx. 6 years. Therefore, a payment of £27,000 will redeem your mortgage - assuming there is no early redemption penalty and/or lender's admin/account closing fee. However, and perhaps this is what is confusing you, if you continue to repay your mortgage for the balance of the 6 year term, your monthly mortgage payments will certainly add up to more than the current £27,000 balance. Do not confuse total to redeem mortgage to amount payable over the outstanding balance of the term.

TrickyDicky101

Let_Us_See wrote: »

DL has confirmed your current mortgage balance is £27,000 with remaining term of approx. 6 years. Therefore, a payment of £27,000 will redeem your mortgage - assuming there is no early redemption penalty and/or lender's admin/account closing fee. However, and perhaps this is what is confusing you, if you continue to repay your mortgage for the balance of the 6 year term, your monthly mortgage payments will certainly add up to more than the current £27,000 balance. Do not confuse total to redeem mortgage to amount payable over the outstanding balance of the term.

OP has already stated he pays £390 pm and has approx term remaining of 6 years which, on the basis of 72 payments remaining, adds to £28k.

So OP quite possibly has a point that the DL reps have it wrong and it is not £27k current balance o/s.

Let_Us_See

Term, about 6 years.

JimmyTheWig

We need the exact figures, OP.

Also, are there any fees included in the redemption figure? E.g. ERCs, if you've moved to a new deal in the last few years or MEAFs, etc?
Might be worth asking them what your current mortgage balance is, as opposed for a redemption figure. If it is different, can they explain the difference?

TrickyDicky101

OP, can you provide accurate monthly payments and exact term remaining (and confirm your rate of interest) as otherwise it is conjecture

Road_Hog

Give or take a few quid, it is about 386 pcm (4%) and the redemption figure is £27K and a few hundred pounds with 6 years to go (72 months).

Basically, if you multiply the monthly repayment by 72 you come to the figure that they gave me.

They did not quote me any redemption charges (I asked the question) and no, there has been no change in the mortgage over the 19 years, apart from the fact that it is on an SVR, so the interest rate has fluctuated with the bank rate.

I tried getting some sense out of them saying, but it you take a mortgage out for £50K over 25 years then the interest is calculated for the full term, say it is then a total of £100K based on full term and then divided by 300, so the interest is calculated for the full term, but I'm redeeming early, so there should be no interest for the last 6 years, but maybe some early redemption charges added.

Both of them said no, the interest is calculated at the end of every month and that's how it works. I said to them, I understood that it was adjusted, depending on whether they recieved payment, no payment or an over payment, but at the end of the day, I was paying interest in that calculated monthly payment (which equalled the redemption figure) and surely a redemption figure would strip out the interest for the rest of the term.

Just to recap, it is a bog standard capital repayment mortgage at 4%, never had anything done to it, about as vanilla a mortgage as you can get. I could understand one CS rep not understanding redemption and just looking at the outstanding mortgage on the screen, but for two to say the same thing surprised me.

Anyway, as I said, don't get hung up on the figures, the logic is, if I redeem now, I will pay the same as continuing the mortgage for the full term.

Is there a special department in mortgage companies that I could get through to, to speak to someone who understands redemption? Direct Line Mortgages is stilled owned by RBS, but they've stopped offering mortgages and I suppose they've become a sort of zombie product.

Thrugelmir

With 6 years to go there's relatively little interest to pay.

£27,000 repaid over 6 years at 4% would require monthly payments of £423. Remaining interest would be £3,412. So the figures to quote are on the low side.

Are you in a fixed term mortgage product where there's an early redemption charge?

TrickyDicky101

They've made a mistake. Your o/s balance should be in the region of £24.6k

Road_Hog

TrickyDicky101 wrote: »

They've made a mistake. Your o/s balance should be in the region of £24.6k

Yep, that's kind of where I have worked it out to be. Just needed someone else to confirm that I wasn't having a mad moment.

I shall have to do battle with CS over the next few days, to get hold of someone that understands what they are talking about.

Road_Hog

Thrugelmir wrote: »

Are you in a fixed term mortgage product where there's an early redemption charge?

Sorry Thrugs, I don't wish to be rude, I know you are a long term member on MSE and I've read many of your posts, but have you actually bothered to read any of my posts, because everything you've asked is fully explained in my posts on this subject.