Mortgage redemption question

Goldiegirl

In my experience mortgage redemption quotes rarely suddenly go 'wrong'

Maybe you need to be looking at it from another angle.

Your annual mortgage startment will have a starting balance and an end balance, so you'll know what the total amount outstanding was at a given point.

Go back to the last point where your felt the year end balance was 'right'.

For example, if at the start of this year, the amount outstanding on the mortgage was £28000, and you were happy with that, it would be reasonable the the current amount outstanding on the mortgage would be less now, but it wouldn't be reasonable that the balance would be down to this figure of 24.6 that you feel is correct now.

By looking at a fixed starting point, you can ask the lender to advise how it has calculated its current redemption figure.

Then it will be easier for you to confirm whether or not the figure is correct

TrickyDicky101

Goldiegirl wrote: »

Your annual mortgage startment will have a starting balance and an end balance, so you'll know what the total amount outstanding was at a given point.

Go back to the last point where your felt the year end balance was 'right'.

This is a good idea - it will confirm (or be strongly suggestive) one way or another who is mistaken.

Road_Hog

Goldiegirl wrote: »

In my experience mortgage redemption quotes rarely suddenly go 'wrong'

Maybe you need to be looking at it from another angle.

Your annual mortgage startment will have a starting balance and an end balance, so you'll know what the total amount outstanding was at a given point.

Go back to the last point where your felt the year end balance was 'right'.

For example, if at the start of this year, the amount outstanding on the mortgage was £28000, and you were happy with that, it would be reasonable the the current amount outstanding on the mortgage would be less now, but it wouldn't be reasonable that the balance would be down to this figure of 24.6 that you feel is correct now.

By looking at a fixed starting point, you can ask the lender to advise how it has calculated its current redemption figure.

Then it will be easier for you to confirm whether or not the figure is correct

You are missing the point, your mortgage statement is based on a full 25 year term, i.e. you pay full interest for 25 years, with a mixture of capital and interest payments. I am quite happy with the statement. The point is, if I redeem early, then the amount should be less due to 6 years less interest payments.

http://www.121finance4u.co.uk/finance/loans/what-if-i-want-to-pay-off-my-loan-early/

JimmyTheWig

Road_Hog wrote: »

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 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.

There's something not quite right with the figures, I agree, but I will say this...
It is you who has the slight wrong end of the stick where it comes to how the interest is charged. Interest is added to the mortgage each month, based on the daily balance that month. It is not all added at the beginning.
E.g. if you had a £50,000 mortgage at 4% for 25 years, at the end of the first year your mortgage balance would be £48,811. if there were no fees to pay on redemption then this would also be your redemption balance. This is the number that the advisor would see on their screens as your current balance.
Nowhere on the advisors screen (as far as I am aware) would it show the total of the remaining payments (in this instance £76,032) - it's just not a number that is of relevance.

Obviously they could have multiplied your monthly payment by the number of months remaining to give you the figure that they gave you, but I seriously doubt that two different people would have both done that.

So either there is something wrong with their computer system (e.g. redemption charges are being added when it says they aren't being added) or the problem is in your understanding.

What you need to know is your current mortgage balance.
Can you phone them up and ask them this?
Or can you see it via online banking?
Or do you have access to your credit file (e.g. Noddle) which would tell you?
Or at least if you can tell us what the mortgage balance was at the time of your last mortgage statement (and when that was)?

Also, can you double-check when your mortgage is due to end? This date will also be on your last mortgage statement, or they will be able to tell you over the phone.

Forget about redemption for a moment. What is your current balance?

TrickyDicky101

What Goldiegirl was suggesting was take the last annual statement you have (eg could be for 7 months ago ie 31 Dec 2012) - this gives you a fixed point with your outstanding balance and then given the rate and remaining term (and payments made so far since the statement) you can determine with absolute certainty what your current outstanding balance should be at 30th June 2013 (say).

JimmyTheWig

TrickyDicky101 wrote: »

What Goldiegirl was suggesting was take the last annual statement you have (eg could be for 7 months ago ie 31 Dec 2012) - this gives you a fixed point with your outstanding balance and then given the rate and remaining term (and payments made so far since the statement) you can determine with absolute certainty what your current outstanding balance should be at 30th June 2013 (say).

I think the problem is that the OP believes that the outstanding balance on their statement includes all projected future interest, which it doesn't.

TrickyDicky101

JimmyTheWig wrote: »

I think the problem is that the OP believes that the outstanding balance on their statement includes all projected future interest, which it doesn't.

I'm sorry but the OP has been pretty clear and this clearly isn't the case.

JimmyTheWig

TrickyDicky101 wrote: »

I'm sorry but the OP has been pretty clear and this clearly isn't the case.

I disagree. I think this post in particular...

Road_Hog wrote: »

your mortgage statement is based on a full 25 year term, i.e. you pay full interest for 25 years ... if I redeem early, then the amount should be less due to 6 years less interest payments.

suggests that the OP believes that if they repay early they should be paying less than the balance on their statement.

TrickyDicky101

Road_Hog wrote: »

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.

Would suggest otherwise...

ValHaller

Going here http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml and putting in a mortgage of £24300 over 6 years at 4% gives a monthly repayment of £386.21. Interest is £81.

Given the fact that I have effectively worked back from a monthly repayment to a principal amount and the repayment is dominated by capital repayment, mathematically, error will change the figures substantially. For example, interest being a few .01% away from 4%, the period not being exactly 6 years.

However, the difference is enough to convince me that OP is not being given the correct redemption figure. What would be really convincing is if the redemption figure is the same as the monthly payment multiplied by the number of months to go.

At a rough approximation with £80/month in interest now which will taper off to £0 over 6 years, there is approx £3000 interest left to be paid, which should come off the monthly repayment multiplied by the number of months to give the expected redemption payment

The £24300 figure looks like £27000 minus interest for me to be fairly convinced that DL are not answering the issue correctly. I am not surprised that a call centre does not provide its staff with access to redemption values - and not surprised either that staff will try to deal with the question by trying to calculate it themselves from a position of complete ignorance about amortization etc.

I suggest that the best way to approach this is to ask in writing for a redemption statement.