20y Mortgage in 1992 now provider is extending term of loan by 9mo -interim interest!

J

janja

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We took out 20 year mortgage in 1992 and have just realised that our mortgage provider are claiming our mortgage wont be repaid for 20 years 9 months even though all payments were made on time.

Having queried this they said :

"The interim interest was correctly charged from the date the loan cheque was cashed on 11 December 1992 to 31 December 1992.

As we cannot know beforehand the exact date on which your solictor will cash the loan cheque (the completition date), the monthly repayments quoted in the Loan Offer letter are not calculated on the sum of the capital borrowed plus the interim interest, just on the capital alone.

The interim interest has the effect of increasing the loan balance, therefore more repayments are required to pay it off. This caused the maturity date of your loan to be extended by 9 months"
Does this seem right to you guys?
Janja
 
Hi Janja and welcome to AAM!

Ive expanded the title of your question and reformatted your post a little to make it clearer.

Can you mention the provider? Was it a Building Society?

aj
moderator
 
This does not seem right. In the normal course of events, if the rate changes the repayment is re-calculated by reference to the time to run on the loan, and that time to run should have been 20 years from the original drawdown date. An adjustment of a month or two at the en might be reasonble, but 9 mths!!!!
 
Gulliver, do I understand what happened here correctly?

The solicitor drew down the cheque on 11 December 1992 and lodged it to his own account.

Then some weeks or months later, the sale closed and the solicitor made out his own cheque for the purchase price.

So he thought he was borrowing €50,000 for exactly 20 years, but instead when he paid €50,000 for the house, he alread owed €50,500?

If it was an annual rest interest calculation, would it make any difference?

But as you say, the repayments should have been recalculated to reflect this.

Brendan
 
Brendan Burgess said:
Gulliver, do I understand what happened here correctly?

The solicitor drew down the cheque on 11 December 1992 and lodged it to his own account.

Then some weeks or months later, the sale closed and the solicitor made out his own cheque for the purchase price.

So he thought he was borrowing €50,000 for exactly 20 years, but instead when he paid €50,000 for the house, he alread owed €50,500?

If it was an annual rest interest calculation, would it make any difference?

But as you say, the repayments should have been recalculated to reflect this.

Brendan
Click to expand...

That was my reading of what happened.

But, I would consider it unacceptable that the extra interest was added to the capital without recalculating the repayments to make the mortage a 20 year mortgage.

They have paid a lot of extra interest.

My advice would be to make an official complaint and follow it up with the Financial Ombudsman if they don't get satisfaction,
 
janja said:
"The interim interest was correctly charged from the date the loan cheque was cashed on 11 December 1992 to 31 December 1992.

As we cannot know beforehand the exact date on which your solictor will cash the loan cheque (the completition date), the monthly repayments quoted in the Loan Offer letter are not calculated on the sum of the capital borrowed plus the interim interest, just on the capital alone.

The interim interest has the effect of increasing the loan balance, therefore more repayments are required to pay it off. This caused the maturity date of your loan to be extended by 9 months"
Click to expand...

A very contradictory and unsatisfactory explanation, I would not be happy with it.

They appear to be suggesting interest for this 3 week period 11th – 31st Dec (cheque being cashed and completion) extended the loan by 9 months, definitely not.

I recon you would need to have been accruing interim interest without making your first repayment for 3-4 months to extend the term by 9 months.

Could this be the case?

Either way I agree with others repayments should have been adjusted to ensure loan was repaid over the agreed term.

Any mortgages I ever had the first repayment was always 1 month after drawdown date, this ensured the loan was repaid over the agreed term and also ensured the mortgage protection policy always covered what was owed.
 
twofor1 said:


They appear to be suggesting interest for this 3 week period 11th – 31st Dec (cheque being cashed and completion) extended the loan by 9 months, definitely not.

Click to expand...

You have to consider that interest rates were approx 14% in 1992

http://www.*****************.com/history-of-mortgage-rates-in-ireland.html

If the original mortgage was £36K, one months interest would be £400.

A very quick calculation shows that £400 in 1992 (€500) borrowed for 20 years with those average interest rates would mean approx €2000 to be paid.

The OPs complaint should be centred on the fact that this interest was added to the capital and they paid interest on it for 20 years.
 
huskerdu said:
You have to consider that interest rates were approx 14% in 1992
Click to expand...


True, but from 1994 (18 0f the 20 year mortgage) they were below 7.50% and even went below 3.5% in 2004. A more realistic average over the 20 years to date would probably be less than 7.00%.
 
7% is a probably close.

If you borrow €500 for 20 years at 7%, you will owe €1930.
The exact numbers are not important. I am merely illustrating that it is very possible for one months interest to turn into €2000 over 20 years.
 
janja

Can you provide some hard information and we might have a collective go at the calculations

How much was the original mortgage for in IR£?



The cheque was drawn down by the solicitor on 11 December 1992.

What exact date did you actually close the sale?

It does seem odd that the EBS did not take the first repayment on 11 January 1993. Would the EBS actually know what date the sale closed on?

Can you remember a discussion about this at the time?

Brendan
 
I do not have much experience with other Financial Institutions but I have with Aib and my mortgage repayments commenced on the same date in the following month following the mortgage chegue being issued. eg. Mortgage cheque issued to Solicitor on 5th March 2012 my first payment commenced on the 5th of April 2012. The actual date of closing had no bearing on the first payment. I would imagine that this would be standard practice across all Financial Institutions.
 
Hi JanJa,

I've been reading your tread regarding EBS and the extended term on your mortgage. I'm in exactly the same position as yourself. I only realised this year that EBS have added on 13 months to my mortgage term. I queried this and got a letter back with the exact wording that you quoted in your original post ie "we don't know when the solicitor will cash the cheque etc". I'm absolutely furious with EBS. I think it is outrageous to extend an agreed mortgage term without even informing the customer. I also found them very slow to respond to my query. I only received a reply last week even though I phoned in January and wrote twice in February and put a query to their CEO via there website in early March).

I was wondering have you followed up with a complaint to EBS and if so how did you get on?
 
You borrowed money for a 20 year period, you made all repayments as requested.

You should both behave like adults here. Stop paying the mortgage when the term is ended.

I cannot help thinking that Janja and Stemel are being treated like naughty schoolboys by the bank, AND YOU ARE ACCEPTING THAT.

If the bank think you still owe them money let them write to you nicely and ask for it. If you understand their reasoning and agree with their calculations then pay them, if not don't.

If the bank is not happy let them take you to court. In reality they probably wont do that, they will threaten like mad but unless they have a proper case and have behaved properly with it they will just let it go.
 
Thanks for your comments, cremeeg.

I'm in the process of an official complaint to EBS regarding the issue and I certainly will not let the matter go until I get some satisfaction. I have maintained the payments in the meantime because I don't want to damage my credit record. I have found out that the reason for the extra year is that EBS added on £200 approx for "Interim Interest" to the capital at the start of the mortgage term and then proceeded to add interest on it for next 21 years. They never bothered to inform us that they were doing this or give us any alternative options for paying this in a more customer friendly way :-((( I'm shocked at EBS and their behaviour.
 
Hi Stemel,

I am in exactly the same position as both you and Janja where EBS have charged interim interest on my mortgage and capitalised it over the 20 years without informing of this. I have been in contact with them since January of this year and it is still not resolved to my satisfaction. I was wondering if you managed to get any further with them?
 
Hi smithk,
Sorry, I'm only seeing your post now. I have resolved the matter with EBS. After a frustrating few months of getting no replies to correspondence. I eventually wrote to the CEO and he passed my complaint on to the customer service centre (I had already written to them but got no reply). Following this I initially received a very unsatisfactory response but I pushed ahead with my complaint. In the end they calculated what I the additional extra term was costing me and they deducted this off the remaining balance. It meant a saving of about €1500. I had checked with an online mortgage calculater and thought is should have been a bit more but I could not say for certain that the online calculator was 100% accurate so I agreed to what they offered by way of resolution. EBS stated that they were facilitating me because I was a long standing customer!!!!!!!!! and not because they did not act in their customer's best interest ;-)
 
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