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variable rate mortgage interest calculation

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  • 29-09-2014 9:57am
    #1
    horsebox7
    Registered Users Posts: 452 ✭✭


    Hi,

    I am wondering if anyone knows exactly how interested is calculated on a variable rate mortgage and also if there is a better time to pay a lump sum? As it is now I pay a set amount of approx €1000 per month but I am also charged additional interest every three months which varies from approx €1500-€1700. Can anyone please explain this?

    Thanks


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    #2
    gypsy79
    Registered Users Posts: 1,785 ✭✭✭gypsy79


    The sooner you pay the better.....the interest is calculated retrospectively every x months

    X is obviously 3 months for you, depends on the bank


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    #3
    Zane97
    Registered Users Posts: 306 ✭✭Zane97


    Can a bank take interest every month instead of 3? They take mine every quarter


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    #4
    gypsy79
    Registered Users Posts: 1,785 ✭✭✭gypsy79


    Robbie G wrote: »
    Can a bank take interest every month instead of 3? They take mine every quarter

    I think quarter is the most common but it doesnt make any difference as the total interest amount will be the same in any case


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    #5
    coylemj
    Registered Users Posts: 25,437 ✭✭✭✭coylemj


    gypsy79 wrote: »
    I think quarter is the most common but it doesnt make any difference as the total interest amount will be the same in any case

    +1 The interest is effectively calculated daily but if they showed it accruing every day then your statement would be very unwieldy so they only visibly add it every month or quarter.

    I think the OP might be of the view that it's better to pay a lump sum on the day before the interest is (visibly) added to the account but that would be wrong. The earlier you pay the lump sum, the less interest you pay so if you have the cash to spare then unless you can get more interest in a deposit account than what you're currently being charged on the mortgage (highly unlikely), you should lodge the money as soon as you can.


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