Overcharged for a coronavirus mortgage break ?

GrumpyDil

As I said earlier I kept out of this yesterday but here goes.

If I owe 20000 and fail to make three payments of 250 each (assuming no interest) I still owe 20000 not 20750.

The capital amount doesn't increase because I didn't make those payments it just doesn't decrease. 

If there was interest of say 100 per month then I would expect that interest to be added to the outstanding balance so say 20300 + some odds. 

getmore4less

Batesy1976 said:

getmore4less said:

Batesy1976 said:

getmore4less said:

Based on the limited information and approximations it does not look right and looks like they may have added the payment..


For 3 payments around  £970  and interest added along with a rate drop of 0.2%, 1.91%, £161k over 16 years you would expect them to near cancel out. (<£5 difference)

Looks exactly right to me.  They said they were going to add the payment.

That may be what they put on the page linked to but it is the incorrect way to deal with payment holidays on mortgages. The examples shown on the same page(£100k 4.34%) confirm that as they only add the interest to work out the increase for those examples.

So maybe the examples are wrong then.


Only adding the interest would be wrong anyway.  The term isn't increased so there are also three missed capital payments that need to be made up too.

When payments restart the new amortisation calculation works out the new payment which includes the original capital  with the acrued interest added over the reduced term which will be an increased payment.


You do not add the capital part of the missing payments again they were never taken off because there was no payment.


My previous 0% example shows the debt should not increase during the pause just a recalculation of the amortisation over the reduced term.

getmore4less

Batesy1976 said:

getmore4less said:

Batesy1976 said:

getmore4less said:

Based on the limited information and approximations it does not look right and looks like they may have added the payment..


For 3 payments around  £970  and interest added along with a rate drop of 0.2%, 1.91%, £161k over 16 years you would expect them to near cancel out. (<£5 difference)

Looks exactly right to me.  They said they were going to add the payment.

That may be what they put on the page linked to but it is the incorrect way to deal with payment holidays on mortgages. The examples shown on the same page(£100k 4.34%) confirm that as they only add the interest to work out the increase for those examples.

So maybe the examples are wrong then.


Only adding the interest would be wrong anyway.  The term isn't increased so there are also three missed capital payments that need to be made up too.

lest try it this way.

1. repayment  mortgage paying £970pm  ~£250pm interest and ~£720pm capital.
   payment holiday you say they should add £970pm
2. interest only mortgage ~250pm
   payment holiday How much should get added each month?
3. repayment gets converted to interest only
   how much is the payment each month?
4. repayment gets converted to interest only
   payment holiday how much gets add each month? 

Spadger42

Maybe Mr Bates doesn’t like to admit he is wrong ? 

sammyjammy

OP have you got a sensible answer from mortgage company yet?  I agree only the interest accrued over the holiday payment period should be added, you can't add more borrowings that they haven't given you!