Mortgage principle

rockdrummer4

Have a question about my mortgage principle.

Say for example I have a remaining principle of 100,000, then I check it again a week later an it has gone up to 100,100.

I rang the bank in question and they said it is to do with the daily interest rate? Is this right?

I though this would just affect your monthly payment and not the principle.

Im on a tracker if that makes any difference?

rockdrummer4

My monthly payment is on 7th of every month, checked balance on the 11 june and today and the principle had gone up by 53, I noted this before back in March where the principle had gone up by 186 !!

_ciaran_

Interest is accrued on a daily basis and posted to your account every quarter (on the 15th of the month I think). Chances are that you checked your balance and the interest for the quarter was posted to your account shortly afterwards.

phormium

Balance of mortgage outstanding goes up and down all the time, goes up every month when interest is added on and goes down when a repayment is made. There is just one balance made up of interest and principal, not two separate amounts.

rockdrummer4

But why does it go up and down, Im on a tracker mortgage wich is a fixed percentage on top of the ECB rate - which does not change on a daily basis !!

Can someone please explain why this happens?

chris85

rockdrummer4 wrote: »

But why does it go up and down, Im on a tracker mortgage wich is a fixed percentage on top of the ECB rate - which does not change on a daily basis !!

Can someone please explain why this happens?

Interest is calculated daily and applied to the balance monthly, in general. So say the interest is applied the last day of each month, the number of days in the month vary obviously so the interest applied changes slightly month on month. And then when you pay the mortgage it clears off the balance.

rockdrummer4

chris85 wrote: »

Interest is calculated daily and applied to the balance monthly, in general. So say the interest is applied the last day of each month, the number of days in the month vary obviously so the interest applied changes slightly month on month. And then when you pay the mortgage it clears off the balance.

Still dont get it, as the last time this happened was in March... so its not as if this happens every month !!

_ciaran_

As per my above post, interest gets posted to your account every quarter. March, June, September and December.

Lets say you are paying daily interest of €5. This does not get posted every day. In March the sum of your daily interest for January, February & March is posted to your account.
Thats €5 x 75 days = €375 posted to your account for that quarter.So your overall balance will now be up by €375. This happens 4 times a year.

rockdrummer4

However, as I said it only went up by €53 in June, which I doubt would be enough for a whole quarter of interest, so this does not explain it... And last March it went up by 186, which again seems like a very small amount???

phormium

It depends on the day of the month you look at the balance. Say the interest is added on the 5th of the month and the payment is the 15th(just for example). On the 6th if you look the balance will be higher than the start of month balance but if you look on the 16th it will be lower but different again after the repayment goes through.

rockdrummer4

As I said payment is on the 7th of every month, checked balance on the 11 June (after payment had been made) and checked again on the 18th June where there was a difference of €53 !!

_ciaran_

7th of June - your payment goes through
11th of June - you check balance
15th of June - interest is posted to your account, increasing your balance
18th of June - you check again. The difference between your repayment and the interest posted is €53

If you give your bank a ring they may be able to explain it in more detail and send you a statement to help illustrate whats happening

rockdrummer4

Still doesnt make sense, as I said the payment goes through and deduted already on the 7th June. The deduction is already made by the 11th, and then for some reason there is a decrepency on the 18th?

And also does not explain, if this is interest for a quarter why it is soo little??

I already have rung the bank, they guy wasnty very bright and just said it was daily interest being added..

_ciaran_

Ask your bank for a statement and you will be able to see exactly what is being debited/credited.

It's hard to speculate as to whether there is anything out of the ordinary happening without seeing the account itself but it sounds like normal mortgage account activity.

I worked in mortgages for some time and one of the most frequent customer queries was on their payments at around the time of interest posting.

It's the banks fault to be fair though. Banks should explain to customers how a mortgage account works before they draw down. You'd be amazed be the amount of people (I'd guess over 75%) that have absolutely no idea how a mortgage account works despite the fact that it's the biggest loan that they will ever take out in their lifetime. Banks need to be more pro active in educating customers on how they work IMO.

phormium

Many the time I spent ages explaining how a mortgage works to customers, they don't want to know, they just want their house, the mortgage is just an unfortunate side effect!

rockdrummer4

_ciaran_ wrote: »

Ask your bank for a statement and you will be able to see exactly what is being debited/credited.

It's hard to speculate as to whether there is anything out of the ordinary happening without seeing the account itself but it sounds like normal mortgage account activity.

I worked in mortgages for some time and one of the most frequent customer queries was on their payments at around the time of interest posting.

It's the banks fault to be fair though. Banks should explain to customers how a mortgage account works before they draw down. You'd be amazed be the amount of people (I'd guess over 75%) that have absolutely no idea how a mortgage account works despite the fact that it's the biggest loan that they will ever take out in their lifetime. Banks need to be more pro active in educating customers on how they work IMO.

Yep definitely agree, I have no idea whats going on.. Im sure it is just normal activity.. but would be nice to understand what exactly is going on.. And nobody trusts banks so I need to underatand aswell

Thanks

_ciaran_

phormium wrote: »

Many the time I spent ages explaining how a mortgage works to customers, they don't want to know, they just want their house, the mortgage is just an unfortunate side effect!

Fair point, I guess people need to show an interest too.

There are so many instances where banks have over charged / under charged due to incorrect interest rates being applied, interest only periods not expiring etc. and your average customer will have no idea until the bank writes to them explaining the mistake. And that's only when the bank realizes the mistake.

I'd say there are plenty of cases where people are paying the wrong rate but they will never spot it as they have no interest in how their account is operating.