How to understand my mortgage interest!

Fay

This is very possibly a dumb question but I've looked and can't find an answer, so please be gentle! I have a fixed rate mortgage which is coming to and end and I'm seeing the mortgage advisor at the bank next week. What I'm confused by is why the interest added monthly fluctuates...often by up to £30. Even though my mortgage amount is reducing last month £4 more interest was added than the month before. I'm not the best with understanding these things and can't understand why, can anyone help me? I would like to go armed wig as much information as I can, I have a largish mortgage and I'm keen to reduce it! Thanks in advance.

Caz3121

interest is calculated daily, some months have 30 days, other 31 (and Feb is shorter too) - could that be the difference?

Fay

Thanks Caz, I'll check that!

getmore4less

Above is the most likely.
Another difference can be related to when the payments hit the account when the normal date is a weekend and how the lender deal with the interest.

Fay

I think the 30/31 day month is definitely impacting on it looking at the last few months. The date often falls on the weekend, I've also noticed that although the bank take my payment on the 1st from the current account the payment doesn't come off the mortgage for a few days, by which time the interest has been added!

Thrugelmir

Days in the month. Lenders systems work interest on calendar months.

When your monthly payment is set. Account is taken of fluctuating days so that the balance owed would be cleared at the end of the mortgage term.

getmore4less

Thrugelmir wrote: »

Days in the month. Lenders systems work interest on calendar months.

When your monthly payment is set. Account is taken of fluctuating days so that the balance owed would be cleared at the end of the mortgage term.

That is not always the case some just use a standard amortization based on equal periods to set the payment, then sort it out later.