early repayment fees

dadoandrew

Hi all. Just looking for some insight from the community. I have a mortgage with preferred, and asked for a settlement figure. Oddly the sum is the whole term loan amount. As in there is no discount in interest I would pay if I kept with them. I thought that the laws had changed and companies were not allowed to do this? Anyone got any ideas on it?

Thrugelmir

There's no interest in the settlement figure you've been given. Interest is calculated and (normally) paid monthly in arrears on the actual balance owed.

dunstonh

Your thread title mentions early repayment fees but there is no mention of these in your post. You may wish to edit your subject title to reflect your post.

As Thrugelmir says, interest accrues monthly (often daily but deducted monthly) and added as you go. If you look at your mortgage statements, you will usually see the addition of interest once a month along with your monthly payment.

Oddly the sum is the whole term loan amount.

Typically, a 25 year mortgage would see you pay back around 2-2.5 times the amount you borrow. So, are you saying that they are asking for around 2-3 times what you borrowed?

dadoandrew

No my issue is that the actual sum owed never seems to get lower, and when I applied to repay another loan 6 years early, there was a significant deduction ion the sum owed. This I took to be owing to 6 years less repayment. If I am wrong then I am wrong. never m ind. it just seemed a bit odd that the two loans could have different early repayment outcomes.

betmunch

Sounds like you have an interest only loan.

Each month you pay only the interest so the balance isnt going down.

The terminology you are using is confusing the issue as the total you would pay over the term would be about double what you took out and would never be on a redemption statement

dunstonh

No my issue is that the actual sum owed never seems to get lower

Are you on a repayment mortgage or an interest only mortgage?

when I applied to repay another loan 6 years early, there was a significant deduction ion the sum owed.

Loans are different to mortgages.