how do banks calculate interest/capital

Hi again,

As per my other thread here, the bank have agreed to back-date my interest only period to December, ie return the capital portion of December and January payments.

My problem is that they are calculating the amount of interest in those payments to be 100 per month higher than the interest only payments we are now making (and were previously when we were on interest only).

I know that the interest rate (tracker) fell between Dec and Jan and this difference is reflected in the total payment.

Figures:
Total mortgage 250,000
Interest rate ECB+.85
"normal" int-only payment @ 1.85% after trs 327
Dec payment 964
Jan payment 930

They are saying that the interest portion of Dec (2.1%) was 463 and Jan (1.85%) was 432.

I have queried their figures with the complaints dept man I've been dealing with and he double-checked and is sure they are correct as they are "based on the total outstanding amount and interest rate at any one time". He is going to get statements and get back to me next week.

What am I missing here?

How much is the TRS?

Are the Dec & Jan interest figures with or without TRS?

Hi Wbbs,

all the figures are after applying TRS.

By my sums:
Dec interest = 250 000 x 2.1% / 12 x .85 = 371.88
Jan interest = 250 000 x 1.85% / 12 x .85 = 327.60

so Dec payment of 964 should be broken down into 372 int and 592 cap
and Jan payment of 930 should be 327 int and 602 cap,
so they should be refunding us 592 + 602 = 1194

Their sums:
Dec payment 964 = 463 int + 501 cap
Jan payment 930 = 432 int + 498 cap
so they want to refund 999

I cannot accept that the interest at 2.1% on 250000 is 463 per month or interest at 1.85% is 432 per month.

Can anyone else work out what they're doing?

Ok, am a bit lost but lets take December, rate is 2.1% is that correct?

If so then-

250,000 (is the balance exactly that, very even, have you paid anything off capital at any time?)

250k x 2.1% = 5,250 p.a.

5,250/365 x 31 days = 445.89 for December.

Int for Jan at 1.85% on 250k would be 392

This excludes TRS obviously, how much is that

This is calculating it monthly, however some banks charge interest quarterly so they may just be dividing a figure by 3 rather than working it out on exact number of days in month.

TRS is 15%.
It's not exactly 250k, but within about a 1000 and I'm not arguing with the bank about a few euro so don't need to be that exact.
I was dividing by 12 rather than by days, but still comes out pretty much at your figures.
The bank's figures are also post-TRS so shouldn't be causing a difference.

So if you ignore the TRS then their figure for dec is roughly right, correct? When did the rate change on your mortgage, maybe the rate went down after first of jan and interest was calculated on 1st?

They seem to be refunding you the difference between int and full payment excluding trs maybe, this is probably correct as the trs should stay credited to the mortgage account and not be refunded to you. Does the mortgage balance reflect a reduction due to leaving the trs in it.?

Ignoring TRS it's still out by about 35 euro each month.

We haven't got statements yet so don't know what they have done with TRS.
My problem basically (and I will say this to them next week) is that they offered to backdate the interest only period and put us in the position we would have been in had it started in Dec.

We would have paid 372 in Dec and 327 in Jan so I think they should refund the balance that we did pay.

Thanks for your help wbbs.

Let us know the outcome, would be interesting to see their explanation.

I certainly will!

Update

Hi again,

I have finally got to the bottom of this - turns out they were using November and December interest figures instead of Dec and Jan and also excluding the TRS.

The guy I've been dealing with in customer complaints was deeply embarrassed - he said his background isn't in numbers and he has to rely on the people who are supposed to be able to work it out. He went back to them when I queried his original figures and they insisted they were right.

I told him that it couldn't possibly add up because I knew what the interest only payments would have been and the difference between that and what was paid had to be capital.

Sometimes they try to make stuff seem a lot more complicated than it actually is.

Just waiting now to get the actual refund.

Moral of the story - don't assume that just because someone is paid to work out figures like this all day long they actually know any better than you do .

Thanks again for the input.