Is an Annual Interest Review mortgage bad for me?

cc1_3

I allways thought i was on a good thing not seeing any interest rises on my mortgage until the new finacial year even when interest rates kept going up.

Now I am porting my mortgage to a new house and I dont know if theres a downside to this,like compared to a monthly maybe not as much is being paid off.

I am on a 2yr dicount rate and never make overpayments,monthly cost is an issue for me and i need to keep payments at a minimum.

with woolwich barclays btw,discount rate finishes in 8mnths

thanks

JoeK_3

Are you on a repayment mortgage?

People in a repayment mortgage that do not overpay should preferably be on a monthly rest, whilst people who overpay in lumps sums should be on a daily rest.

In markets where interest rates are rising, you can accrue a debt at the end of the year on an annual rest basis, whilst interest rates are dropping you could be overpaying your mortgage.

Hope this helps

JoeK

chivers1977

Woolwich repayment mortgages are only reviewed for the payments required at the mortgage year end which is 30th September, whilst the interest rate being charged is being amended at each base rate rise. What this will mean for you is that the base rate has risen 1% since then. Your discounted rate is charged at a discount from the SVR ie 7.89% whereas the SVR in Septmber IIRC was 6.79%. Your payments will not have increased to take this into account unless you specifically request it.

This is a separate issue to whether you are on daily, annual or monthly rest which impacts when your payments are used to reduce the balance for interest purposes.

cc1_3

JoeK wrote: »

Are you on a repayment mortgage?

People in a repayment mortgage that do not overpay should preferably be on a monthly rest, whilst people who overpay in lumps sums should be on a daily rest.

In markets where interest rates are rising, you can accrue a debt at the end of the year on an annual rest basis, whilst interest rates are dropping you could be overpaying your mortgage.

Hope this helps

JoeK

thanks for the info

yes its a repayment mortgage

so if i,m accuring a debt at the end of each year,how are they getting back what i should have paid?

does this go onto the monthly payment aswell as the rate rise?

cc1_3

chivers1977 wrote: »

This is a separate issue to whether you are on daily, annual or monthly rest which impacts when your payments are used to reduce the balance for interest purposes.

thanks for the info

so i'm better off for having a lower payment each month as its not in line with inflation till year end but my balance isnt going down as quick therefore paying more interest?

right or wrong :huh:

JoeK_3

cc1 wrote: »

thanks for the info

yes its a repayment mortgage

so if i,m accuring a debt at the end of each year,how are they getting back what i should have paid?

does this go onto the monthly payment aswell as the rate rise?

It means that your payments will increase in line with any interest increases that have taken place plus any payment that have not been made in the previous year.

JoeK

getmore4less

cc1 wrote: »

thanks for the info

so i'm better off for having a lower payment each month as its not in line with inflation till year end but my balance isnt going down as quick therefore paying more interest?

right or wrong :huh:

Yes and when they do recalculate you will then pay more each month to catch up so be ready for that.

cc1_3

getmore4less wrote: »

Yes and when they do recalculate you will then pay more each month to catch up so be ready for that.

cheers

just been told new monthly cost without extra borrowing when mortgage is ported to new house

not much i can do as tied in for another 8mnths.

will probly end up staying with them because of exit fees but if i do i will be asking for a monthly review