Interest on KBC Mortgage Arrears

E

emmacollins7

Guest
Hi,

In September I was late paying the full amount of my mortgage. KBC sent me a letter telling me that they were charging me interest on my half a months arrears.

Are they allowed to do this? I thought that this had been made illegal or is that only tracker mortgages? I'm on a variable rate.

All comments most welcome.

thanks, Emma C
 
Hi Emma

No. It's not illegal. It's perfectly normal.

People sometimes find it difficult to understand, but I will try to explain.

Interest is charged on the outstanding balance on the loan every day.

If your loan is €100,000 and you make your repayment of €1,000, interest will be charged on the €99,000
If you don't make your repayment, you will be charged interest on the full €100,000. So you can interpret this that you will be charged interest on the arrears of €1,000. But it forms part of the balance, so they are right to charge it.

What the Mortgage Arrears Code does not allow is for them to charge you penalty or additional interest on the arrears.

So they can't charge you 4% on the €100,000 and an extra 20% on the €1,000 in arrears.

Brendan
 
Hi Brendan,

So for example I have a mortgage repayment of interest only plus 100euro towards the captiol, the total being 1,021euro per month. I paid 500 and then the further 520 at the beginning of this month. KBC charged me interest on the outstanding 521euro becasue I didn't pay it before the end of September. Is that standard?

Thanks,
Emma
 
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