Questions on sub account and overpayments

Minute

Hi

I am very confused with our mortgage with C&G and I hope you Mortgage savvy people will help me understand...

Why do we have a sub-account?
Firstly, I don't have a clue what a sub-account 99 is, why it exists. Basically each month on this 'sub account', there is a payment due of £4.83, with and added interest of around £1.70. This is different from interest on the mortgage which is added separately.

Next, overpayments and recent lowered interest rates..
Our mortgage balance on 31 dec 2015 was roughly £158,000, with 16.5 years still to pay, with a 2.5% interest rate.

For many years (can't remember how many eek!), we have been overpaying. The payment due was £1077, but we have been paying £1400 instead. Still, the balance seems to take forever to go down, with a monthly interest of about £350 on the statement (this interest amount varies slightly each month by the way, from a few pounds to £20, why is that?)

Recently, with interest rates dropping by 0.25%, we received new calculations which I don't understand, it says :

Contractual monthly mortgage payment
sub account 01: £940
sub account 99 £4.70

Then it says 'regular payment arrangement amount, £318.

Checking our recent bank statement, a total of £1263 was indeed debited.

What happened to the basic £1077 monthly payment before interest of circa £350, why is it now £940. Perhaps we should be happy the monthly payment has gone down but I don't know what's going on and am concerned money is being managed in a way I don't understand and perhaps making repayments take longer than they should. For instance, I had done some overpayment calculations online some time ago, and according to the tool, from the then balance and overpaid amount, should save us 7 years in mortgage payment, but our statement makes no adjustement or projected time remaining.

Sorry about the long email, I find it hard to get my head around this.

thanks!

anna42hmr

Sub accounts are often used for example for mortgage fees if added to
a mortgage or for example extra lending was taken and added to the mortgage at a different interest rate to main mortgage. Have you looked at online banking as my bank confirms what the sub accounts are for online in a breakdown

Interest applied will vary as things like days in month vary so if interest accrued as a daily rate then will differ month to month

As for the change in contracted payment it may be that your mortgage co recalculates the payments to take into account that you overpaid.

HHarry

Minute,

I think Anna has got it right.

Sub-accounts are just a way of identifying different parts of your mortgage. We have a sub-account 1, which is the intrest only part of our mortgage, and a sub-account 2 which is repayment. I'd agree that your sub-account 99 probably relates to mortgage fees.

The reduction in interest rate means that your monthly repayment is re-calculated. This is done on your actual balance at that point, and is based on the 16.5 years you have left.
The bank won't automatically reduce the term by 7 years as they have a contractually obligation to lend for a full 25 years - but they will have reduced your monthly paymeny by an extra amount to allow for the overpayments.

If you keep overpaying you will still pay your mortgage off early. Keep your payments at £1400, and you'll save even more than 7 years!

Minute

Thank you.
I'm still not clear as to how they calculated £940 from £1077, it's not just a 0.25% reduction I don't understand how they got to that figure, and why they didn't ask me whether I wanted to just keep paying £1400 instead (if I can pay overpay I will, who wouldn't..)

tunnel

Minute wrote: »

Thank you.
I'm still not clear as to how they calculated £940 from £1077, it's not just a 0.25% reduction I don't understand how they got to that figure, and why they didn't ask me whether I wanted to just keep paying £1400 instead (if I can pay overpay I will, who wouldn't..)

C&G have recalculated your repayment as if you were going full term. As an example I could have recently reduced my payment down to £260 a month(from £320) and go full term or continue to pay at the rate I am and pay off early.
Give them a call and they'll explain it to you
You'll still repay early as they've kept the overpayment going but if you can afford more(£1400) then you take even more off the term.