Am I being overcharged ?

wooder

I took a repayment mortgage out with L&G in 2000 - £55,000 over 20 years. The interest was guaranteed never to be more than 1.5% over BoE base rate. I have never missed any payments, the payments have always been increased or decreased immediately following a rate change and I've never had anything unusual like a payment holiday.

My monthly payments at the moment are £324.76/mth and have been at a similar level since the BoE rate dropped to 0.5% back in 2009 (actually from 2009 -2016 the repayments were a bit more at £330.20)

My problem is that when I put the figures into a mortgage calculator (sum borrowed plus term plus interest rate) it tells me the repayments should be £276.00. What have I missed ?

TrickyDicky101

How much do you actually have outstanding on your mortgage? Should be a very low balance by now, right? Look at your latest statement to see what the split between capital and interest is.

wooder

What I am getting at is - I borrowed £55,000 over 20 years and the current mortgage interest rate on my statement is 1.9%. Put those figures into a calculator and it tells me I should be paying £276/mth.... but I am actually paying £324/mth - how can this be ?

I have checked on my last statement and the term has not decreased so what other variables are there ?

TrickyDicky101

But what you are paying each month is different to what you are being charged in interest - your mortgage agreement apparently guarantees to limit the interest. So, to confirm if this is the case or not you need to know the split of capital repaid + interest paid in that period. You have not yet done that - you are just looking at your total repayments.

Imma_Number

You used the mortgage calculator in a way that assumes you are paying 1.9% for the whole 20 years.

For the first 9 years the base rate was 4-6%. https://www.economicshelp.org/wp-content/uploads/2017/09/uk-base-rates-79-17.png

So if you put into the calculator 55,000 for 20 years @ 6% (assuming 1.5% over 4.5% base) that's ~£394 pcm leaving ~38,000 by end of year 9.

Then put in £38,000 borrowed over the remaining 11 years at 1.9% and you get £319 pcm. Which isn't far off what you are paying

This is just a rough and ready calculation, not taking into account all the fluctuations over the early years but it should give you an illustration.

amnblog

There are numerous variables, not least that for the first few years you may have been paying 6.5% not 1.9%.

The nuances of the deal, the timing of the interest charges, the Lender's own method of managing the loan, and potential additional fees like insurance are all factors.

You may simply be over paying.

Only your Lender can answer your query.

wooder

The mortgage company has always increased and decreased my payments according to the rise and fall of the interest rate over time so I've kept pace with the additional cost when interest rates were higher. I haven't just paid the same amount all the time, so I assumed that at any point in time I could input the interest rate at that time into the calculator and it would tell me what the monthly payment should be, based on £55k over 20 years.

I started the mortgage in November 2000 and looking at the statements, exactly 12 years later the balance at 30/11/2012 was £25379.49. I know that the interest rate on that date (and in fact for years after) remained steady at 1.9% - that is the rate that they they were charging me, as printed on my statement, but if you input £25379.49 for the remaining 8 years at 1.9% the calculator gives a monthly payment due of £285.... not the £330.20 that they were taking from me.

They debited me £330.20 monthly from 2009 until September 2016 when the interest rate dropped even further by another .25% and they reduced the payment slightly to £323.03

Just can't see how they arrive at that figure ?

TrickyDicky101

Again, I'll ask - what have you actually been charged in interest?

You've quoted the balance o/s at 30/11/2012, you've confirmed what your repayments were for the (presumably next 12 months) at 12 * 330, so now you can see what interest they have actually charged you if you can quote what the balance outstanding was on 30/11/2013.

Whilst it may be of interest to see how they arrived at the repayments they have set, your deal does not guarantee you a particular repayment - it apparently guarantees (or limits) the maximum interest you will pay.

bigisi

TrickyDicky101 wrote: »

Again, I'll ask - what have you actually been charged in interest?

You've quoted the balance o/s at 30/11/2012, you've confirmed what your repayments were for the (presumably next 12 months) at 12 * 330, so now you can see what interest they have actually charged you if you can quote what the balance outstanding was on 30/11/2013.

Whilst it may be of interest to see how they arrived at the repayments they have set, your deal does not guarantee you a particular repayment - it apparently guarantees (or limits) the maximum interest you will pay.

There's none so blind as those who cannot (or in this case WILL not) see.

John-K_3

wooder wrote: »

The mortgage company has always increased and decreased my payments according to the rise and fall of the interest rate over time so I've kept pace with the additional cost when interest rates were higher. I haven't just paid the same amount all the time, so I assumed that at any point in time I could input the interest rate at that time into the calculator and it would tell me what the monthly payment should be, based on £55k over 20 years.

If you are going to make incorrect assumptions, then yes, you’ll get nonsense answers out. Why did you make this assumption, when it doesn’t work that way?

jamesperrett

wooder wrote: »

What I am getting at is - I borrowed £55,000 over 20 years and the current mortgage interest rate on my statement is 1.9%. Put those figures into a calculator and it tells me I should be paying £276/mth.... but I am actually paying £324/mth - how can this be ?

In the early days of your mortgage your payments were calculated so that, if the interest rate remained the same, your payment would be constant through the life of the mortgage. In the initial stages of the mortgage much of what you paid back would have been interest so that your outstanding balance wouldn't have reduced very much. The idea was that, in the final few years of your mortgage, you would be paying much more of the capital than before.

When the interest rates reduced you still had that high level of capital to repay so your payments would be higher than for someone who took out the same mortgage in recent years who would be paying more capital off right from the start.