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• FIRST POST
• MikeBeirne
• 3rd Oct 17, 9:44 AM
• 4Posts
• 1Thanks
MikeBeirne
Can anyone explain how this works in simple terms please.
Interest only mortgage which is fixed, figures below are rounded
Mortgage £60000 repayment £266 pm
I paid a lump some of 20% (£12000) off the capital which was all without penalty
Now mortgage £48000 repayments £213 pm
Twelve months later paid another £12000 off the capital (10% interest free plus the rest with interest)
Now mortgage £36000 repayments £185
So my question is for example the last lump sum payment is 25% of the remaining capital so why does my monthly repayment not reduce by 25% as well? Is there a simple answer?
Should I have not paid the lump sums and kept the money in the bank until the mortgage end in a couple of years?
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• TrickyDicky101
• 3rd Oct 17, 10:10 AM
• 3,031 Posts
• 1,957 Thanks
TrickyDicky101
I agree that on an interest-only basis you would expect proportionate reductions in interest charged for capital repaid (all other things remaining equal).

Hence, are you sure no charges have been applied?
• kingstreet
• 3rd Oct 17, 10:15 AM
• 33,552 Posts
• 18,192 Thanks
kingstreet
If you use the first calculation to calculate the rate, it's 5.32% pa.

Then, on £48,000, the monthly payment at 5.32% is £212.80. Which appears consistent.

Finally, on £36,000, interest at 5.32% is £159.60 not £185 so something has changed. Either the balance is more than £36,000 or the rate has increased.
I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
• MikeBeirne
• 3rd Oct 17, 10:35 AM
• 4 Posts
• 1 Thanks
MikeBeirne
Thank you for your comments, I will contact the lender and see what is going on. I will post their comments also
Cheers and thanks again
Mike
• MikeBeirne
• 3rd Oct 17, 2:07 PM
• 4 Posts
• 1 Thanks
MikeBeirne
Thinking about it, it might be that I have made the lump sum payment partway through the month so the full effect doesn't happen until next months payment. So this months payment may be half based on £48000 and the other half on £36000
Cheers Mike
• MikeBeirne
• 16th Oct 17, 4:54 PM
• 4 Posts
• 1 Thanks
MikeBeirne
Yes, because I paid the lump sum midway between usual standing order dates the interest is also split. Next months payment is around £160 which is what I expected as the new monthly payment.

Cheers Mike