Concernednot all the overpayments are being applied

donenvy

Hi all,

I've come here today because I noticed overpayments I am making were not reducing the balance by what I thought.

My mortgage was at 41072.74 at the end of the deal. I moved onto a SVR rate which allows unlimited payments.

So I decided I would overpay to get the balance to a round figure of 40,000.

So this is where I get confused, I overpaid by 1072.74, my balance did not reduce to 40,000, instead it ended up at 40,008.45

Confused I paid another 10 to get it down, this time it reduced it even less by few pennies to 40,007.84.

Why is it when I am over paying the balance is not reducing by the overpayment I am making?

Second payment 9.39 went on something else, and 0.61 on reducing balance.

When I ask the mortgage company, they say it is because I am paying off interest? But is that not already covered by my normal monthly payment? Any additional payment I make should reduce balance and not pay more interest?

Really confused,can someone help explain if they understand as I dont

ACG

You could be reducing the term instead of the balance?
Ask them for a breakdown of your payments and see if it tallies up with what you are paying.

donenvy

ACG wrote: »

You could be reducing the term instead of the balance?
Ask them for a breakdown of your payments and see if it tallies up with what you are paying.

Hi yes that is what I have chosen, it had one option to reduce monthly payment or reduce term.

I chose to pay the mortgage off early by reducing the term option. So does that mean any overpayments I make will not reduce the balance by the same amount? Why did the second payment have so much interest.

I did try speak to the mortgage company but all they kept saying is that it is paying off interest

Imma_Number

My guess: You paid the 1072.74 and the daily interest accrued, but not yet capitalised, was capitalised as you'd reduced the balance. So they need to recalculate the daily interest. This happens normally when you pay your regular monthly payment.

Then a few days later, and a few more days of daily interest, you paid £10 but £9.39 of that was the daily interest accrued.

Good news is your next monthly payment will(should) have to cover less interest and more will be taken off the balance.

ACG

Sorry, I have just re-read your post again. Was on hold when I was reading it on the phone. I read it as your payments were staying the same... busy day ignore me.

Your balance should be coming down with the over payments - I would ask them for a breakdown and see what they come back with.

Thrugelmir

donenvy wrote: »

So this is where I get confused, I overpaid by 1072.74, my balance did not reduce to 40,000, instead it ended up at 40,008.45

Confused I paid another 10 to get it down, this time it reduced it even less by few pennies to 40,007.84.

Interest accrues on a daily basis. So you'll need to allow for this.