Fixed Rate Mortgage - payment different from the one stated on the mortgage offer let

Monfreid

Hello,
I have just finihed to build my house and the last draw down of money was done recently.
During the build, at every stage payment, I received a letter giving me the mortgage payment amount based on what I had withdrawn so far.
In the mortgage offer letter (fixed rate for 60 months, total lengh over 25 years), it says 1195 eur per month
Now, on the last letter, after all the funds have been withdrawn, it says 1208 eur ...
I called the bank and they said it's because interest are calculated daily and because it took more than 6 months to withdraw all the cash, then the repayment has to be adjusted. First drawdown in july 2016, last one in october 2017. Mortgage offer letter from June 2016.
I don't fully understand their explanations so if someone could explain to me in simple terms that would be great :-)
Thank you

CeilingFly

Yep its down to timing.

The original quote was based on full amount drawn down on a specific date, however you drew down in stages over 15 months - example is 12 months for ease of calculation

Lets say mortgage is for 240k
Lets say four draw downs 60k each.

Repayment quoted is for 240k drawn down july 2016 at 25 years.

Lets say 60k drawn every 4 months

Actual mortgage is 60k 25 years, 60k 24 years 8 months, 60k 24 years 4months 60k 24 years.

Your figures will be different, but the last drawdown is paid over 23 years 9 months, thus creating a slightly higher payment than the quote which was based on all funds at 25 years.

Monfreid

CeilingFly wrote: »

Yep its down to timing.

The original quote was based on full amount drawn down on a specific date, however you drew down in stages over 15 months - example is 12 months for ease of calculation

Lets say mortgage is for 240k
Lets say four draw downs 60k each.

Repayment quoted is for 240k drawn down july 2016 at 25 years.

Lets say 60k drawn every 4 months

Actual mortgage is 60k 25 years, 60k 24 years 8 months, 60k 24 years 4months 60k 24 years.

Your figures will be different, but the last drawdown is paid over 23 years 9 months, thus creating a slightly higher payment than the quote which was based on all funds at 25 years.

Thanks very much for the explanation, it makes sense now :-)
I have another question:
I was told that interest are calculated daily so would that make sense to pay the mortgage biweekly instead of monthly or is it better to pay a bit more (65 € max) each month?
Thank you

CeilingFly

On almost all loans interest is calculated daily.

For fixed rate, extra payment probably can't be done as it would require break fees of minute calculation.

Once fixed is over you can overpay - some banks (kbc do) allow you withdraw the overpayment when you wish

Monfreid

My mortgage is with BOI and, for fixed rates, the maximum monthly overpayment is 10% of the monthly mortgage repayment, or €65, whichever is greater. So I was thinking of paying an extra 65 eur per month for the duration of the fixed rate but also ask to pay fortnightly instead of monthly as you can save money that way too (you make one extra payment per year) and it makes sense also since I'm paid every 2 weeks, just need to check if they can facilitate this as it's not really in their interest
According to their calculator, increasing my payment by 65 eur permonth could save me:
Interest Savings: €9,481.34 & Term reduction: 1yrs, 10mths
So I'd say that paying biweeky could save me even more