Is This Normal?

[tedney]

I have an interest only mortgage, with monthly payments. The monthly payments have not changed for a number of years, as they are linked to the unchanged bank rate.

 

On checking my credit file, and the monthly balance information over the last visble 6 years, the balances have gone up and down on a monthly basis, even though the payments have been at the same level.

 

Shouldn't the starting balance be the same as the current balance on an interest only mortgage?

 

Overall there is a net decrease of the overall balance of £1,100.00 odd to the outstanding balance

 

The overall monthly increases add up to £2,700.00 odd and the overall monthly decreases add up to £1,600.00 odd. Would this make a significant difference to what I am being charged please?

 

Thanks

t

[unclebulgaria67]

Balance should be the same, if interest only.

 

You need to ask the mortgage company, as this could be an IT system issue, if you are seeing a decrease over the year.

[citizenB]

I think this has something to do with the fact that interest is added daily but your repayments are only deducted calendar monthly.

 

So you make 12 payments over the year.

 

February will have 28 days interest added

April, June, September & November - will have 30 days each interest added

The rest will have 31 days interest added.

 

Apparently if you pay say on the 30th of each month, every time there is a month with 31 days in it, it is costing you more interest.

 

That was the way it was explained to me.

[tedney]

Balance should be the same, if interest only.

 

You need to ask the mortgage company, as this could be an IT system issue, if you are seeing a decrease over the year.

Thanks unclebulgaria67. I think I will write ask for clarification then.

t

[tedney]

I think this has something to do with the fact that interest is added daily but your repayments are only deducted calendar monthly.

 

So you make 12 payments over the year.

 

February will have 28 days interest added

April, June, September & November - will have 30 days each interest added

The rest will have 31 days interest added.

 

Apparently if you pay say on the 30th of each month, every time there is a month with 31 days in it, it is costing you more interest.

 

That was the way it was explained to me.

Thanks citizenB. I get the principle of your explanation. There are many months with just a small difference. As you have explained in all the Februarys the variance is at it's monthly greatest, about £90.00, whereas most other months are nowhere near this much. On looking further with one or two notable exceptions, there are similar differences on the same months each year.

However a couple of the months show a difference in excess of £1000.00 in the balance, and some others with £50 to £100 difference!

As my previous post in response to unclebulgaria67, I will write for an explanation.

Thanks again

t

[citizenB]

Please do let us know what the mortgage company says when they respond

[tedney]

Please do let us know what the mortgage company says when they respond

 

OK will do.

[citizenB]

[Ruleoflaw]

I have an interest only mortgage, with monthly payments. The monthly payments have not changed for a number of years, as they are linked to the unchanged bank rate.

 

On checking my credit file, and the monthly balance information over the last visble 6 years, the balances have gone up and down on a monthly basis, even though the payments have been at the same level.

 

Shouldn't the starting balance be the same as the current balance on an interest only mortgage?

 

Overall there is a net decrease of the overall balance of £1,100.00 odd to the outstanding balance

 

The overall monthly increases add up to £2,700.00 odd and the overall monthly decreases add up to £1,600.00 odd. Would this make a significant difference to what I am being charged please?

 

Thanks

t

 

 

If you have an interest only mortgage, do you have adequate means to pay it off such as an endowment? If you have an endowment is it performing enough to pay mortgage off once your mortgage is complete?

[Ruleoflaw]

If you have a 'repayment' mortgage, you're paying interest as well as money (capital) each month. So, as you're paying money (capital) off you're mortgage balance will go down and at the end of the mortgage term you'll have paid your mortgage off in full. With an interest only mortgage as you're not paying capital unless you have an insurance policy (endowment), you're essentially paying the interest on the mortgage only. This mortgage interest starts from when you started the mortgage to when you pay it off (the mortgage duration). This is why I asked if you had an insurance policy to pay off mortgage at the end of the mortgage period.