Customer Payment Allocation -Halifax

Thrugelmir

£10,000 over 30 years at 3.99% will incur £7,166 in interest.

So where does £463 come from?

philsteward

Thrugelmir wrote: »

What lump sum are your proposing to pay in?

There is no lump sum being paid in, this is for the allocation of my monthly mortgage payments which are just over £400 per month.

philsteward

Thrugelmir wrote: »

£10,000 over 30 years at 3.99% will incur £7,166 in interest.

So where does £463 come from?

£463 is the amount Halifax are saying I could REDUCE my interest by, if I choose to pay ALL my repayment amount each month to account 1

Thrugelmir

philsteward wrote: »

There is no lump sum being paid in, this is for the allocation of my monthly mortgage payments which are just over £400 per month.

Ok. With only £10,000 owing you'll shorten the term from 30 years to under 2 years. So unsure where the Halifax derives its figures from.

Looks as if the calculator is misleading.

philsteward

Thrugelmir wrote: »

Ok. With only £10,000 owing you'll shorten the term from 30 years to under 2 years. So unsure where the Halifax derives its figures from.

Looks as if the calculator is misleading.

Indeed, hence my confusion. They do even state that whatever allocation I decide on will be void if one of my accounts is cleared and subsequently closed early. So seems like they are looking at things correctly, it just does not make sense.

I will have to speak to them and make sure they have their calculator working correctly.

Thrugelmir

philsteward wrote: »

They do even state that whatever allocation I decide on will be void if one of my accounts is cleared and subsequently closed early.

Seems as if they are forcing the overpayments to be apportioned. Rather than directed at a particular sub account. Seems rather sneaky!

PeacefulWaters

If I do 100% to account 1 then I only save £461 interest
If I do 100% to account 2 then there is an increase of £4433 interest.

This looks right.

If you throw your money at account 1 the debt will be repaid within a couple of years. Even at interest only you'd only be paying £798 over two years. So saving just over half this amount seems spot in.

If you throw your money at account 2, the interest will roll up on account 1 at a rate of £398 a year (plus compounding effect).

The problem with the calculator is that it doesn't appear to calculate the interest saved over the subsequent 28 years when the debt is nil. Lower apportioned payments carry the debt for longer so calculate the saving over more years. It's flawed.

Max out the higher rate first if the T&Cs allow.

amnblog

A 'brilliant' piece of non-information from Halifax.

Giving the borrower the decision and the risk.

Having seen the calculator the premise is quite simple, the execution and results less so.

Designed for regular payments not one off

Our original poster has a one off refund to allocate between his accounts but it appears that the tool on the link provided is designed to allocate regular monthly payments.

The result of the calculator is not as simple as allocating payments to the highest interest rate as it is calculating benefit based on the remaining term of each sub account.

Imagine Buckets

If you imagine a series of buckets, each with a level of water in them, each with an amount of water dripping in each month (interest), each with a tap draining them (payments). When a bucket is totally empty (zero balance) water stops dripping in (interest).

The trick is to have all the buckets empty with the minimum amount of water having dripped in between now and that point.

Not about highest rate

Opening the tap hard on the one with the highest rate of interest is not the answer if another bucket with less interest but with more contents will be filling up for much longer.

Hope that makes sense.

beckyblyth

So as I have three sub-accounts all over the same period of 4 years 4 months, all variable, surely it would be best for 100% of my payment (£382) to go to the sub-account at 3.99%-balance £1034 (the other two, £14963 and £3050 are both at 1.99%). This would mean this sub-account would be cleared in a few months, leaving me with the lower rate accounts.


As for "the calculator" it does say that overall interest savings/increases are calculated until a sub-account is repaid or its term expires. In my case this wouldn't take very long with the above allocation and all my sub-accounts are over the same period, so I think the calculator is misleading in predicting a minimal saving.


Please correct me if I'm wrong.