On a fixed rate but my monthly payment keeps going up!

liveo

Hi all this is my 1st post on here so please be gentle!


I took the plunge and bought my 1st home in July this year for £289995. I had a deposit of £140000 so the loan amount is £151499 (including a £1500 product fee which I was told by my broker I should add to the mortgage in case the application falls through?). With the uncertainty regarding interest rates, especially a couple of months ago and hearing from several sources that there’s a strong possibility they would start to rise soon I took the safe option and went for a Woolwich 10 year fixed rate at 3.89%. With an ltv of 52% that was the best 10 year fixed rate at the time by far. When I applied for my mortgage the initial paperwork said I would be paying £900.30 each month. On 21st July, the day before funds were due to be released for completion, I received a 1st payment notice from them confirming that £900.30 would be my monthly amount to be paid out on the 1st of each month Starting 1st September. On the 2nd August I received a revised payment notice increasing it to £909.30 per month. September & Octobers Direct Debits came out at £909.30 and I made an overpayment on 8th October of £2500 to my mortgage. I then received an annual mortgage statement on 10 October that only detailed my 1st September payment but strangely it also informed me that they have put the monthly amount up yet again now to £911.84 starting on 1st November. I know it is only a small amount extra per month but I thought the whole point of a fixed rate is that you know exactly what is coming out each month. It seems to be going up all the time! When I phoned and questioned them I was told it needed to go up to bring the mortgage "back on track" as it had fallen behind as there was a large gap between funds being released on 22nd July and my 1st payment on 1st September. I did not ask for such a big gap and would have been perfectly happy for my 1st payment to be made on 1st August. Are they acting fairly and correctly here?


With regards to the broker saying I should add the mortgage fee to the mortgage due to the fact the mortgage there is a possibility the application may fall through due to Gazumping or whatever, is this correct? I took his word for it but looking back all he seemed to be interested in was boosting his commission by selling me all sorts of things like life insurance, sickness insurance, pension, home insurance and goodness knows what else so I wouldn’t be surprised if it earned him more commission saying that!

Thrugelmir

Simply not enough time for the Direct Debit to be put in place on 1st August if your mortgage completed on the 22nd July. Hence the 1st September start date. Standard procedure at the outset of all mortgages.

If the mortgage product fee was non refundable. Then yes you would have lost the money.

ACG

The response they have given you does not seem unreasonable but if you are not happy ask for it in writing.

The reason there was a 5-6 week delay between completion and the first payment is likely that your payment comes out on the first of the month and there was not enough time to collect between the 22nd and the 1st. Although in saying that the first payment is usually 1 months payment plus the interest for those 5 weeks and then subsequent payments are back in line with as expected give or take.

As for the fee being added, personally I think its the best way to do. It saves you risking the fee and you can always make a £1500 (in this instance) overpayment to pay off the fee once it has completed... but each to their own I suppose.

liveo

Thanks for your replies, my mind has been put at rest. With regards to the point about the 1st payment being larger, I have actually found another letter from them saying the 1st payment will be for £1562.28 which incorporates my regular £900.30 payment plus £661.98 part interest payment for July but they never collected this amount in September, just the £909.30 that they told me that they told me on 2nd August would be my regular payment amount. I guess thats why they needed to put it up to £911.84 to get back the £661.98 that they didnt take in September.

getmore4less

They my also have set the payment based on the initial drawdown not with the fees added.

as you have overpaid the missing interest and the fee after the new payment was calculated you are probably overpaying a bit with the normal payment.

SuperSaver123

liveo wrote: »

Thanks for your replies, my mind has been put at rest. With regards to the point about the 1st payment being larger, I have actually found another letter from them saying the 1st payment will be for £1562.28 which incorporates my regular £900.30 payment plus £661.98 part interest payment for July but they never collected this amount in September, just the £909.30 that they told me that they told me on 2nd August would be my regular payment amount. I guess thats why they needed to put it up to £911.84 to get back the £661.98 that they didnt take in September.

You got yourself an answer.

mandm65

Adding fee to the mortgage amount may be best way in this instance but adding fee to your amount changes your APR? I would like to know if there was different APR on offer I were to pay the application fee up front?

getmore4less

Paying fees up front or not makes no difference you just borrow less or overpay if you have the money, if you don't then you have to add.

APR has no practical use when dealing with mortgages

getmore4less

Trimming out the key facts.

liveo wrote: »

I took the plunge and bought my 1st home in July this year for £289995.
I had a deposit of £140000
the loan amount is £151499 (including a £1500 product fee which
10 year fixed rate at 3.89%.

paying £900.30 each month.
On the 2nd August I received a revised payment notice increasing it to £909.30 per month.

September & Octobers Direct Debits came out at £909.30
I made an overpayment on 8th October of £2500 to my mortgage.

£911.84 starting on 1st November.

reverse engineering
http://www.whatsthecost.com/mortgage.aspx

£150000 @ 3.89% 20years £900.30

add the fees

£151499 @ 3.89% 20years £909.30

So that matches the first change

1st payment will be for £1562.28 which incorporates my regular £900.30 payment plus £661.98 part interest payment for July but they never collected this amount in September

add the missing interest(which is now wrong as this was before the 1500 was added a max of £5 more)
)
£152161 @ 3.89% 20years £913.27

this is slightly out as you have now made at least one payment and are now a bit into the mortgage

The Annual statement should have a new amount owing and term on which the new payment was calculated

if we take off the Sept payment of £909 and set the payment to £912

£151292 @ 3.89 paying £912 239 months with a last payment of £93

Which is close enough

if you stick the numbers on the annual statement it should be closer

Now if we take off £2500 off the original loan.

£149000 @ 3.89% 20years £894.30
(it will be bit different as other payments have been made.)

this means you re currently overpaying around £18pp

£149000 @ 3.89% paying £912 234 months last payment £33

you are on track to knock about 5-6 months off the loan.

that's the power of overpayments.

liveo

getmore4less wrote: »

Trimming out the key facts.



reverse engineering


£150000 @ 3.89% 20years £900.30

add the fees

£151499 @ 3.89% 20years £909.30

So that matches the first change



add the missing interest(which is now wrong as this was before the 1500 was added a max of £5 more)
)
£152161 @ 3.89% 20years £913.27

this is slightly out as you have now made at least one payment and are now a bit into the mortgage

The Annual statement should have a new amount owing and term on which the new payment was calculated

if we take off the Sept payment of £909 and set the payment to £912

£151292 @ 3.89 paying £912 239 months with a last payment of £93

Which is close enough

if you stick the numbers on the annual statement it should be closer

Now if we take off £2500 off the original loan.

£149000 @ 3.89% 20years £894.30
(it will be bit different as other payments have been made.)

this means you re currently overpaying around £18pp

£149000 @ 3.89% paying £912 234 months last payment £33

you are on track to knock about 5-6 months off the loan.

that's the power of overpayments.

Thanks or the comprehensive breakdown.

I have now made 3 overpayments in total since starting to repay which total £7574 (5% of remaining balance) which they said on the telephone is the maximum amount I can make until July 1st 2015 without incurring early repayment charges. This means have knocked 18 months off the loan already. Will the approximate £18 pm that you say I am now overpaying push me over the limit and allow them to charge me early repayment charges.
Does this mean I will be taking nearly 2 years off the loan (18 months for my overpayments plus 5-6 months you mention above for them making me overpay each month)?
Sorry if I have got it mixed up.

getmore4less

A lender should not be charging ERC for any payments by the DD they use to collect payments.