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Mortgage Annual Statement - Interest and Repayment of Mortgage
Skid1982
Posts: 3 Newbie
Hi All,
I recently received my annual Mortgage statement and it breaks down my monthly repayments and then has a new line for balance adjustment where the take a portion of that payment for the interest payment.
My question is: Why is the interest payment more than what goes towards my mortgage repayments?
Basic Details:
Current Rate: 4.44%
Repayment method: Capital & Interest
I pay £407.34 per month. On my statement I have a Credits (C) and Debits (D) (to be expected I guess).
The Credits show up as Repayment for the full amount of £407.34.
The Debits show up as Debit Account interest and varies each month but is on average £285.36.
Annual Repayment made: £4,888.08
Amount of interest debited: £3,451.92
Doing some simple maths on this shows that its around 70% on interest payments for a Capital & Interest repayment mortgage with a fixed rate of 4.44%. It doesn't seem right (or I don't understand the logic).
Why is my Interest repayment debited at 70% (unless my maths is wrong) out of my repayment amount? This is more than the interest rate applied so why is my interest amounts debited at such a high rate?
If I were repaying the full amount and interest that were charged when I took the mortgage deal, surely the whole amount should have come off my mortage balance, but instead it looks like I have paid 70% of fees in interest. Anyone able to clarify this for me please?
I recently received my annual Mortgage statement and it breaks down my monthly repayments and then has a new line for balance adjustment where the take a portion of that payment for the interest payment.
My question is: Why is the interest payment more than what goes towards my mortgage repayments?
Basic Details:
Current Rate: 4.44%
Repayment method: Capital & Interest
I pay £407.34 per month. On my statement I have a Credits (C) and Debits (D) (to be expected I guess).
The Credits show up as Repayment for the full amount of £407.34.
The Debits show up as Debit Account interest and varies each month but is on average £285.36.
Annual Repayment made: £4,888.08
Amount of interest debited: £3,451.92
Doing some simple maths on this shows that its around 70% on interest payments for a Capital & Interest repayment mortgage with a fixed rate of 4.44%. It doesn't seem right (or I don't understand the logic).
Why is my Interest repayment debited at 70% (unless my maths is wrong) out of my repayment amount? This is more than the interest rate applied so why is my interest amounts debited at such a high rate?
If I were repaying the full amount and interest that were charged when I took the mortgage deal, surely the whole amount should have come off my mortage balance, but instead it looks like I have paid 70% of fees in interest. Anyone able to clarify this for me please?
0
Comments
-
Interest is calculated daily and charged monthly on the capital balance owing.
If you take a 25 year term repyment mortgage as an example. Until the 13th year. The amount of interest charged exceeds that of the captal repaid.
That's the way the maths works. Why even overpayng by a minimal amount can make a signigicant difference in reducing the amount ofinterest charged over the term of the mortgage.0 -
Well it's 4.44% in interest on the balance of the mortgage.
So annual interest is as above. Divide it by 12 gives the monthly amount. Very rough calculation3
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