Interest only mortgage Capital increase

arumlily123

I have an interest only mortgage, I have paid all the requested interest payments yet at the end of the year the ammont owed has increased.

My mortgage year runs from 13aug06 to12aug07. From Feb 07 I paid £50 above the requested payment but at the end of the year the amount owed was more than at the beginning by £587.
I had a mortgage arrangement fee of £115. My payment of £115 was credited to my account 15 aug06 the fee was debited 16 aug 07. No other fees were applicable to my account.

How can I stop this happening.

arumlily123

homer_j_3

is your mortgage calculated on a daily/monthly/annual interest basis?

You need to to check your annual statements going back right to the start BUT from what you have said, it does not seem correct.

The only other thing it may be is if you are on one of these accounts where you are on a variable rate but only review your payments annually so if rates have gone up, your balance will increase and your repayments will be recalculated to repay that shortfall over the remaining term.

Which lender are you with? Have you called and asked for an explanation?

Rifleman

Did you source this mortgage yourself or did you get expert advice from an advisor before signing up to it?

homer_j_3

Does it matter?

arumlily123

my mortgage is with Birmingham Midshires interest calculated daily.
variable rate 0.89% above bank of england base rate for 24 months from sep 2006 then a variable 1.75% above bank of england base rate for the remaining term. Changes made on my account on the 1st of the month my payments on 13th of the month.
I have contacted them re this, they updated my statement which did'nt answer the question asked.

Mortgage taken out in 2004 via a mortgage advisor after two years mortgage advisor advised Birmingham Midshires were still coming up with best deal for me so I was advised to contact them direct.

Yes it does matter I work hard for my money and I like to know where its going and why

homer_j_3

sorry, I was asking rifleman if it mattered whether a mortgage adviser advised you.

When the base rate went up this year, did your payments?

arumlily123

Shows how easy it is to get the wrong end of the stick!!

Yes there have been several increases over the year but from 12 feb07 I have paid £50 in addition to the requested payments.

homer_j_3

this seems to me that you are not on annual rest and does seem strange when you are on daily rate of interest.

There either has been a charge put on somewhere (initial interest maybe at the start of the mortgage possibly - but should have shown at the last statement if you are on your 2nd mortgage statement with them.

I would put a letter together asking for written explanation if you cannot get the verbal answer out of them . Sorry I cant be of more help but the lender is usually the best port of call for these queries as they have produced them.

If that fails, maybe your last adviser would see if they could spot anything you are missing. He will need your authority again for him to speak to the lender on your behalf.

Griptool

arumlily123 wrote: »

I have an interest only mortgage......
Mortgage taken out in 2004 via a mortgage advisor after two years mortgage advisor advised Birmingham Midshires were still coming up with best deal [for him]

Yes it does matter I work hard for my money and [GIVE IT TO THE BANK]I like to know where its going and why

Do you have a means to repay the capital at the end of the loan? I guess not.

Paying interest only is folly, if you can't afford the loan on a repayment basis you can afford the loan! sell up now if you can and try again when you finances/The market* (delete where appropriate) have improved

jill2002

Hi

Maybe the statement has been printed before your payment arrived e.g. statement printed 1st Jan and your payment was not made until 13th Jan. Interest accrues daily and would show on your balance and then the balance reduces when your payment hits the account. This explains it for the first year, but the second it should work out ok. Check that there are 12 (monthly) payments on your statement.

arumlily123

:beer: I think you ve got it assumed an annual statement would show 12 monthly payments when I've checked there are only 11.
Theres still a slight increase which I guess is the difference in increases being applied on the 1st and my payments on the 13th. Thanks for that!

Arumlily123