Secured Loan Settlement Figure

Enigmatic_Me

In June 2006 we applied to our lender, Halifax for a Further Advance on our mortgage. They said that as the lending would run a few months into hubby's retirement they couldn't do a Further Advance but could offer a Secured Loan for same rate over remaining term which was 20 years.

So we borrowerd £12,800 with a £299 admin fee and the first monthly payment was made in July 06. The monthly payments started off around £95 per month but with interest rate increases ended up just over £100. We have paid a total of 16 months, so approx £1600 in total.

We have just remortgaged with Nationwide to get away from the Halifax, to get a good fixed rate and consolidate the 2 loans over a shorter term. When we got the settlement figure for the Secured Loan we were absolutely horrified to find that the amount to repay was £12801. :eek: So basically we have paid £1600 and reduced our debt by only £300. I simply cannot believe that this is correct.

I wrote to Halifax for a breakdown calculation and got a pathetic reply which only told me how much we had borrowed and what the admin fee was!! A follow up letter has been sent.

I would love to hear from anyone if they can shed any light on how this redemption figure has been calculated.

Thanks in anticipation.

CLAPTON

a little light on detail like the interest rates and was there an exit fee
but by way of an example

suppose you borrowed 13,099 at 6.7% over 20 years .. then you would pay about 100 per month.
In the early months of the loan then of the 100 about 73 would be interest and only 23 would be capital...

so after 16 payments you have only repaid about 400 of the capital.

Enigmatic_Me

Clapton

Thanks for your reply. There was no exit fee and as for the rate??? All I know was it was a monthly rate, and have asked Halifax twice what the APR is and so far nobody can tell me!! I think it must have been around the 7 - 8% mark.

CLAPTON

if you tell me the monthly rate I can work out the APR for you

but if the APR was about 7.5% then you would pay about 102 per month of which (in the early days) 76 would be interest so after 16 payments you would owe about 12,600... a bit less than your redemption figure but fairly close. For 'normal' loans regulated by the CCA lenders are allowed to add two months interest which would be about 150 so it doesn't look too bad I'm afraid.

I think it you looked at your main mortage statements you would probably be surprised how little you pay off the capaital in the early years too.

Enigmatic_Me

Clapton

Thanks for that. Unfortunately I do not know the monthly rate and two people I asked in Halifax, neither of them could tell me!! From what you are saying it is obviously right. My complaint would be had we added it on to our mortgage by way of a further advance we would have paid off more than £300 so I am afraid we were given bad advice!!

Retired_I.F.A.

I think you'll find a settlement figure for a secured loan is calculated totally different to a settlement figure on a normal mortgage.
It's been a long long time since I saw it in writing last but I remember it being based on the total amount that would be paid if left to run it's course discounted by a factor to todays value. That factor was prescribed by a code of industry practice or evem legislation i'm not sure.