My monthly payment amount

magpies79

Hello would appreciate some advice on how Halifax have come to this figure for my monthly mortgage payment as I’m shocking at maths to be honest…..

So as of today…..

Term remaining 4 years 10 months 

Outstanding balance is £27,743.03

Current payments are £587.69 on the 28th of the month 

Current interest rate is at Halifax SVR 8.74%

Letter received today from Halifax rate reduction on my mortgage of 0.25%

New rate is now 8.49% New monthly payment is now £597.05  £10 more 

How is this even possible no missed payments no arrears no payment holidays

Any ideas why this would be 

Many thanks 

Mark_d

That makes no sense at all!

magpies79

Is that the way I’ve wrote it or the figures sorry if it’s the first or you mean how have they come to that figure?

just to add incase I’m confusing people on the way I’ve wrote it……

Exodi

Are you physically paying £597.05 or is that what they're predicting?

I do enjoy getting into the Maths of mortgages, but you don't need to do fancy calculations to know that you'll have a lower payment with an interest rate of 8.49% compared to 8.74% over the same term.

My guess is it's an estimated figure (whenever I apply for rate switches, they calculate the payment on the balance at the moment I applied for the rate switch - not based on what the estimated balance might be at the time the rate changes).

As your mortgage balance fluctuates depending on the day of the month (e.g. if you pay your mortgage at the start of the month, then your balance at the start of the month will be a lot less than the end of the month (as interest is accrued daily) it could just be that they've calculated this payment on a higher balance than your last calculation (which would only make sense if your current payment was recently decided) - but I don't suspect this is what you'll actually pay.

If you are actually paying more, then this defies logic and I'd call them up and ask why.

magpies79

Im currently paying £587.69 received the letter today states rate change going down by 0.25 new payment next month £597.05

kingstreet

Is this the result of an annual review as well as a rate change?

magpies79

Exodi said:

Are you physically paying £597.05 or is that what they're predicting?

I do enjoy getting into the Maths of mortgages, but you don't need to do fancy calculations to know that you'll have a lower payment with an interest rate of 8.49% compared to 8.74% over the same term.

My guess is it's an estimated figure (whenever I apply for rate switches, they calculate the payment on the balance at the moment I applied for the rate switch - not based on what the estimated balance might be at the time the rate changes).

As your mortgage balance fluctuates depending on the day of the month (e.g. if you pay your mortgage at the start of the month, then your balance at the start of the month will be a lot less than the end of the month (as interest is accrued daily) it could just be that they've calculated this payment on a higher balance than your last calculation (which would only make sense if your current payment was recently decided) - but I don't suspect this is what you'll actually pay.

If you are actually paying more, then this defies logic and I'd call them up and ask why.

Appreciate the reply well I agree I didnt think I needed to be fantastic at maths to understand lower rate lower payments but was worried I was over thinking this and just didn’t understand it lol

i have rang them about 30mins ago and she stated a new figure that was now £589 a month but this was an estimate and I will have to wait for another letter 

magpies79

Well my next payment is due 28th of august for the amount I’ve been paying since the last rate rise which is £587.69 is it best to wait then and see what it states my next payment as?

on the balance  and interest charged daily again this is where me not being great with numbers lol so bare with me…..

wouldn’t the amount they estimate my payments to be still be lower as one it’s 0.25% less now plus the amount I owe is probably roughly £4k less then the last rate rise? I hope they makes sense 

Exodi

magpies79 said:

wouldn’t the amount they estimate my payments to be still be lower as one it’s 0.25% less now plus the amount I owe is probably roughly £4k less then the last rate rise? I hope they makes sense 

It's as simple as lower rate = lower payment (over the same term) because you are paying back less interest. The amount you owe being less is a red herring (as obviously the term decreases with the balance, so a lower balance does not mean lower payment if the term is going down as well).

I think it's as I suggested - the monthly payment amount in the letter is an estimate based on the current balance at the time, and is unlikely to be the amount you actually pay. My lender, Nationwide, did the same for my rate switches. I think the reason they don't try to predict the future balance is because it is influenced by things out of their control (for example overpayments or missed payments) and they probably don't want to deal with the complaints of guessing what their customers future balance might be and getting it wrong.

To provide my own estimate:

I estimate balance on 28th August to be about £27,829.39 and then using the FV function: =FV(0.0874/(365/31),1,587.69,-27829.39,1) returns an estimated balance of £27,443.92 on 28th September.

Then plugging this into the PMT function: =PMT(0.0849/12,57,-27443.92,0,1) returns an estimated monthly payment of £582.62. The reason I say estimated is because the function assumes that every month 'period' is the same, whereas in reality months have a different number days from each other. Nonetheless, while it doesn't get the exact values, it gets very close.

But to be honest it doesn't require any fancy calculations to know your payment should be lower.

Hope that helps - I'd encourage you to wait to see what is actually taken (or check the letter to see if it's calculated on your current mortgage balance, or their forecast of what your balance will be on 28th Sep - I suspect it's the former).

penners324

Why are you on the SVR? Get it remortgaged

magpies79

penners324 said:

Why are you on the SVR? Get it remortgaged

We plan to move this year so don’t want to be on a fix rate and have to pay ERC fees and credit file was in a mess up until a couple of months ago so that also limited options.