Intrest payments on mortgage

rev229

Sorry if this is a stupid question but why is the amount of intrest I pay on my mortgage varying each month? It varies by about 50-70 pounds. The mortgage is a tracker with IF and all our savings (30,000) are offset. We took the mortgage in May 06 it was 155000 and we now owe 134000. Our monthy payments are 1104 but we overpay by at least 500.00 a month. with the occassional large overpayment. In August the intrest we paid was 600 and this month 500 but there has been an increase in the intrest rate and mortgage payments I think our mortgage went up by 20-30 pounds. Surely if we owe less the amount of intrest we pay each month should be less I would ring the bank but don't want to appear stupid when they explain the logic! I just want to pay the mortgage of ASAP. Any advice very welcome.

jamesd

Divide the interest by the number of days in the month. Does that decrease so long as the interest rate is the same?

IveSeenTheLight

rev229 wrote: »

Sorry if this is a stupid question but why is the amount of intrest I pay on my mortgage varying each month? It varies by about 50-70 pounds. The mortgage is a tracker with IF and all our savings (30,000) are offset. We took the mortgage in May 06 it was 155000 and we now owe 134000. Our monthy payments are 1104 but we overpay by at least 500.00 a month. with the occassional large overpayment. In August the intrest we paid was 600 and this month 500 but there has been an increase in the intrest rate and mortgage payments I think our mortgage went up by 20-30 pounds. Surely if we owe less the amount of intrest we pay each month should be less I would ring the bank but don't want to appear stupid when they explain the logic! I just want to pay the mortgage of ASAP. Any advice very welcome.

First of all, well done in reducing your mortgage by 20,000 in just over a year.
I trust your offset amount hasn't changed, also the amount of interest is related to the amount of interest days as per jamesd post.
If you still think there is something not right, do not ever hesitate to contact your bank to ask the question.

The only questions which are stupid are the ones which are not asked.

when you make the call, you should wither get an explanation from the bank as to the amount of interest or identify there was a problem which can be resolved.

Either way your concerns would be answered by making the call

what are you waiting for.......... pick up the phone now

rev229

Thanks for the replies, the amount does change depending on the days of the month, but then I noticed that my payment had decreased the last time the intrest rate went up So I rang the bank, wery nice the people at IF as they are UK based unlike barcleys:mad: . It was all explained to me ie number of days in month and changes in intrest rates. The reason that my payments had gone down when the intrest rate went up was beacause of the overpayments we have made. As we have just made a big overpayment in August this will reduce the intrest on the mortgage when next recalculated. So when intrest rate go up again our payments will decrease.:D Makes sence now! Anyway what ever we have left at the end of the month above the extra 500 goes into the mortgage no matter how little. Hopefully I will be returning to work following a career break which means all the money I earn will be knocked of the mortgage:j :j. Can't wait to get rid of the mortgage as it is our only debt. I know we will have this mortgage paid in the next 5-7 years hopfully!!

IveSeenTheLight

rev229 wrote: »

So when intrest rate go up again our payments will decrease.

Watch out for this little mortgage lender trick.
When the interest rate changes, they adjust your payments.
This means your mortgage term remains the same, only you need to pay them less monthly.

You need to insist that your payments stay the same, not decrease. This will result in your term being reduced and thus paying off your mortgage early.

Unfortunately I think a lot of lenders automatically recalculate the monthly payments required when interest rates change to maintain the original term length agreed.

CaroB_2

Hi, I have an IF mortgage too, the super-flexible tracker offset mortgage which means I can pretty much do anything to the mortgage without any unexpected fees, which sounds similar to the one the OP has.

AFAIK there are three options as to what to do with your offset savings (although it doesn't mention overpayments). They are (in no particular order):
1) Reduce your monthly payments
2) Reduce the amount of interest you pay on the mortgage
3) Reduce the term of the mortgage.

Now I've opted for option 2) as I want to reduce the amount of interest I pay and consequently pay off my mortgage faster. However, surely this also results in 3) as my monthly payments change with the interest rate changes and so as I'm paying less interest on my mortgage due to offset savings, more of my monthly payment is going towards paying off the balance of the mortgage. Surely this reduces the mortgage term, otherwise what happens when I get to the point of having paid off the mortgage using just my monthly payments and still have time left on the term?

I'm also overpaying where I can. Does anyone know what effect this might be having - are my monthly payments lower than they would have been otherwise? That is: does IF, when it recalculates my monthly payment after an interest rate rise, take into account the balance of the mortgage plus the interest left to pay and work out how much I'd need to pay per month to pay it all off in the term, and only then do they take into account my offset savings?

I'm fully anticipating that we will not be in our flat for the next 29 years and so I will not still be with IF and the same mortgage at the end of the term, hence I've not gone for option 3) as I feel if I try to overpay, offset, etc., by the time we come to buy our next property we will need less of a mortgage as we will have more capital to put down (we have a very low LTV anyway).

What do other people think?