BOSI/Pepper Interest only tracker question on treatment of capital payments

[davy200]

Hi, I have an old BOSI Interest only Tracker, now managed by Pepper. Over the last few years I have made a series of one-off payments to eat into the capital amount. For a long time, each time I did that, the main capital balance would reduce and the following month’s Interest payments were also reduced a little, to allow for the reduced capital amount. However, at some point in the last 2-3 years I have noticed that the one-off payments are no longer directly removed from the outstanding capital balance, but are shown as “arrears”. The ongoing interest only payments are not reducing as before, but instead I think the surplus interest amounts are also being knocked off the capital balance. Is my understanding correct? I don’t remember them writing to me advising of the change?

Anyone familiar with this care to comment please?

 

[Paul F]

@davy200 Can you request a statement, e.g., of the last 12 months' transactions on your mortgage account, from Pepper?

 

[Brendan Burgess]

@davy200

Pepper seems to be having problems with their systems for issuing statements.

Pepper: unable to provide basic statements

Hi, I have a relatively small commercial loan administered by Pepper (old NIB loan). Requested interest certs/statements at end of January. They advised they could issue them after a couple of weeks due to a "system issue". Since then, not heard a whisper from them. No written explanation...

www.askaboutmoney.com

However, you will need to get them because you need to check that they are doing it right. They have made mistakes in the past, but mainly on the calculation of arrears.

In simplified terms...

If you have a mortgage of €100k at 12% interest, your monthly interest charge and payment should be €1,000.

If you make a repayment of €10,000, the statement should show a balance of €90,000 and your interest charge should fall to €900 for the month and if they have a direct debit, they should only suck €900 from your current account.

Some lenders do show the capital amount as €100k and "advance payment" or "negative arrears" of €10,000.
As long as they are charging you interest on the net balance of €90,000 that is fine. Messy, but fine.

Your statement should clearly show the calculation of interest and the repayment you have made. So, it might look like the following:



The key figure is that they calculate the interest on the net amount. It's not that important whether they take out €1,000 or €900 repayment.

When I say your statement should be like the above, in practice, some lenders have really complicated statements with their own internal codes which you have to guess what their meaning is.

Brendan

 

[davy200]

@davy200 Can you request a statement, e.g., of the last 12 months' transactions on your mortgage account, from Pepper?

Thanks for the reply Paul. Yes I have annual statements, and I have mocked up a portion of the 2021 statement to show how they are calculating it. See attached. (not actual values obviously). It seems like they charge me the same interest all the time, even after I have made lump sum payments, but then they seem to work out the value of the interest that is forgone by my lump sum payment and they also knock that value of my capital sum too. It's probably all in order but it seems an overly complicated way to work it.

 

[Brendan Burgess]

@davy200

OK, so they are arriving at the correct answer. They are giving you a credit for the negative arrears balance.

What is the bank credit of €428.57? Is that an extra amount you are paying every month?

Brendan

 

[davy200]

@davy200

Pepper seems to be having problems with their systems for issuing statements.

Pepper: unable to provide basic statements

Hi, I have a relatively small commercial loan administered by Pepper (old NIB loan). Requested interest certs/statements at end of January. They advised they could issue them after a couple of weeks due to a "system issue". Since then, not heard a whisper from them. No written explanation...

www.askaboutmoney.com

However, you will need to get them because you need to check that they are doing it right. They have made mistakes in the past, but mainly on the calculation of arrears.

In simplified terms...

If you have a mortgage of €100k at 12% interest, your monthly interest charge and payment should be €1,000.

If you make a repayment of €10,000, the statement should show a balance of €90,000 and your interest charge should fall to €900 for the month and if they have a direct debit, they should only suck €900 from your current account.

Some lenders do show the capital amount as €100k and "advance payment" or "negative arrears" of €10,000.
As long as they are charging you interest on the net balance of €90,000 that is fine. Messy, but fine.

Your statement should clearly show the calculation of interest and the repayment you have made. So, it might look like the following:

View attachment 6699

The key figure is that they calculate the interest on the net amount. It's not that important whether they take out €1,000 or €900 repayment.

When I say your statement should be like the above, in practice, some lenders have really complicated statements with their own internal codes which you have to guess what their meaning is.

Brendan

Thanks for taking the time to look at this Brendan. As per my reply to Paul earlier, my monthly direct debit payments stay the same, no matter how much I make lump sum payments, but the extra interest that should not really have been payable, seems to get knocked off the capital sum too. The lump sum payments that I have made in recent years show up (when I login to Pepper) as arrears, see attached. Again, it might all be correct but seems overly complicated. It certainly wasnt always done this way, but I don't remember any communication about this changed way of working

@davy200

OK, so they are arriving at the correct answer. They are giving you a credit for the negative arrears balance.

What is the bank credit of €428.57? Is that an extra amount you are paying every month?

Brendan

yes thats the lump sum payments that I make ad-hoc. Thanks for taking the time to look at this.

 

[Brendan Burgess]

The lump sum payments that I have made in recent years show up (when I login to Pepper) as arrears, see attached.

You didn't attach that. I would be interested in seeing it.

The main thing is that they are calculating the interest correctly, if complicatedly.

I agree the direct debit should be falling each month, but as you are overpaying anyway, that is not relevant.

Brendan

 

[davy200]

Just to close out on this, would I be correct in believing that I am neither advantaged or disadvantaged by the way this is done, or does it make absolutely no difference.

You didn't attach that. I would be interested in seeing it.

The main thing is that they are calculating the interest correctly, if complicatedly.

I agree the direct debit should be falling each month, but as you are overpaying anyway, that is not relevant.

Brendan

Maybe I misled you there, the Pepper online account doesn't show payment history, etc. It just shows the current balance (what they call the Principle balance), then the arrears balance, which is the correct total of the lump sum payments that I have made, and finally the date and amount of the next payment.

 

[Brendan Burgess]

You are neither advantaged nor disadvantaged.

I presume that attachment shows something like



It is a confusing way of doing it.

Brendan

 

[davy200]

You are neither advantaged nor disadvantaged.

I presume that attachment shows something like

View attachment 6709

It is a confusing way of doing it.

Brendan

yes thats how it is presented. thanks again