Interest only

Realist

Question.

Paid large lump sum off our interest only mortgage capital so the amount outstanding is lower but the mortgage company’s monthly payment has not reduced, is that right?

Surly if I owe less on the capital the remaining monthly payment which is interest only should be also lower.

Anyone?

luvchocolate

I get a yearly mortgage statement which gives the new payment after over payment 

dunstonh

Paid large lump sum off our interest only mortgage capital so the amount outstanding is lower but the mortgage company’s monthly payment has not reduced, is that right?

When you made the overpayment, did you instruct them to recalculate the monthly cost?     It sounds like you didnt.

You get a choice. Leave the payment where it  (so you pay it off quicker) or reduce it to reflect the new balance but keep the existing term.

barbedhook

Are you on a fixed rate? 

Realist

Ummmmm?

interest only mortgage 
Owed £103000
Monthly Payment £360
Time left 6 Years 10 Months

Paid £25000 off the £103000
Owe £77000
Monthly fee still £360 over the same term 6 years 10 months.

To me I’m paying more interest than I should?

[Deleted User]

You're not paying more interest.  

You're just paying off the capital as well as the interest now.  It's impossible to pay more interest than you should.

If you keep making the normal payments, your term will finish earlier.

Realist

How, my mortgage still says the same term 6 years and 10 months, the same interest rate and the same monthly fee.

Yes I’m on a fixed interest only mortgage.

Realist

Plus if I continue to pay £360 or so a month over 6 years 10 months I’ll still owe 77k mortgage.

Realist

Deleted_User said:

You're not paying more interest.  

You're just paying off the capital as well as the interest now.  It's impossible to pay more interest than you should.

If you keep making the normal payments, your term will finish earlier.

But that’s if it’s a repayment mortgage not interest only.

dunstonh

Monthly fee still £360 over the same term 6 years 10 months.

Do you mean monthly payment? (not fee)

If you didnt tell them to reduce the monthly payment then they will keep it the same so you will pay it off quicker (as said earlier)

To me I’m paying more interest than I should?

The monthly payment and interest charged are two different things.  They were synchronised before but you have reduced the balance.  So, they are no longer synchronised.

getmore4less

It won't get paid off sooner because £360pm is not enough.
The amount to pay off will be smaller.

Realist said:

Ummmmm?

interest only mortgage 
Owed £103000
Monthly Payment £360
Time left 6 Years 10 Months

Paid £25000 off the £103000
Owe £77000
Monthly fee still £360 over the same term 6 years 10 months.

To me I’m paying more interest than I should?

I would be more concerned about the interest rate because £360pm on £103k is 4.194%

why is your rate so high?
mortgage was over 6y 10months

amount	rate	payment	owing	interest
£103,000	4.19%	£359.99	£103,000	£29,519

now 

£77,000

4.194%

£359.99

£68,388

£20,907

recalculate payment

£77,000

4.194%

£269.12

£77,000

£22,067