Mortgage Interest Calculation

[stevieob]

Some of you may have seen my post re TRS changes to our Mortgage repayment, and it got me thinking... how much I dont trust the banks!

In my email to them, I asked how interest was calculated. You see we pay extra off per month, and i don't believe they take this into account as they calculate our interest.

The replied that it is calculated daily so i tried to work it out and no matter how i do it, it wont match their figures, but it is not massively different. It should really be bang on shouldn't it?

Also as we are entitled to the full TRS deduction, should this be taken off the interest daily?

Can anyone help with exactly how the interest should be calculated?

 

[rameire]

The Trs will reduce the mortgage balance when ever the Mortgage lender applies the trs to the mortgage account,
be it on the first day of the month, on the last day of the month or when the dd is applied.
so when the trs hits the mortgage it will effect the interest calculation on the mortgage.

as regards you paying off extra on your mortgage.
some banks may apply it when you pay, some might wait until the end of the month to apply the extra payment to the account thus it not effecting the interest straight away, and some banks may hold the extra payments in a side account which will not effect the interest calculation on the mortgage until it reaches a certain amount.
it should be laid out in your loan offer.

 

[jack2009]

I did this (paid off lump sums) and wondered the same about interest.

I did manage to work out their figues and they did agree in that interest did appear to be calculated daily etc. It did take me one or two attempts as I had ommitted the exact dates of when interest rates had changed etc.

Perhaps like many maths problems leave it for a bit and try to calculate it again with fresh eyes.

 

[stevieob]

just spent the morning looking through the forum rather than working!
think i figured it out.
the interest is calculated daily, based on the previous days closing balance at todays rate (when there is a change in rates). no interest the first day!
however the interest is not applied to the account so the interest for each day stays the same till the end of the month, when the interest is applied to the account, nice one... its in my favour.

when my repayment went through, the daily balance changed so this is also in my favour.

im starting at the start, so havent got to the stage where i started to make extra payments, so will let you know how i get on.

now i picked up something about paying weekly rather than monthly to reduce the interest charge.

anyone know if i can do thin on a perm tsb tracker which goes out round the 14th of each month