I have an interest only mortgage.
Every now and again we get a statement from the building society detailing the payments we have made. Also, the statement details the amount outstanding.
I assumed the amount outstanding should equal the amount of the original advance. However, it varies over time by as much as a hundred pounds or so either way.
Why is this? Why does the outstanding balance vary? Surely it should stay the same?
shokka
Does your payments change everytime there is an interest rate change?
No, it is an interest only fixed rate deal. However, on the mortage statement the amount outstanding varies between statements.
Anyone know why this is?
shokk
Some people pay insurance policies as part of their mortgage direct debit. If this doesn't get paid for some reason then your balance goes up.It shouldn't happen, but it does. It should correct itself before the end of the month.
Rob Graham
In message , Shockwave writes
It sounds like the interest is calculated and accrues on a daily basis but is applied less frequently, but you have a fixed monthly payment.
You pay monthly but because of different month lengths and weekends & bank holidays etc., the number of days in an 'interest month' is not constant, hence the interest charged varies slightly, whereas your monthly payment is fixed, hence the balance variations at statement date.
This is because rate changes have not been applied to your monthly payments very accurately. This applies particulary to mortgages where the payments only change once a year, or with daily interest mortgages where the day the rate changes apply differ to the date your mortgage payment is made.
This can result in under or over payment of interest, which can be in the hundreds with some lenders, particularly older Nationwide loans.
Hope this helps
In message , Simon Karande writes
But its a fixed rate!
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