Mortgage interest charged

P

Pinoy adventure

Registered User
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Hi

Our interest is charged every quarter.
The first payment was roughly €1300.

We took advantage of the €5,000 over payment capability in December 23 & January 24 and knocked €10,000 off the balance of our mortgage,and reduced them monthly amount repayable.

However this months interest went up too €1570 on the lower balance of mortgage.

Is this correct ? Or should interest be dropping on the lower balance of mortgage ??

Thanks
 
The increase in interest sounds wrong.

I assume the interest rate didn't increase in the interim.

Maybe the bank charged you a penalty (incorrectly in my opinion) for the overpayments.

When you say the first interest payment was €1300, do you mean that this is a new mortgage?
 
Thinking about this you may have overpayed by too much. And they charged you a penalty.

If the first €5000 payment was a percentage of the 2023 mortgage, it would have reduced the mortgage principal so the 2024 allowed overpayment would have been less than €5000.

It would be worth discussing it with them. Maybe try to get the penalty refunded.
 
It is very unlikely to be wrong - it is much more likely that you are confused.

You are using the word "interest charged" and "payment" interchangeably when they are two different things.

My guess is, and it's only a guess, that as you refer to the first interest charge, that it was not for a full three months and the later figure was for a full three months.

You can estimate the rough interest charged fairly easily.

Take the mortgage balance at the start of the three month period and the mortgage balance at the end and divide by two to give you the average balance.
Multiply this by the interest rate to give you the annual charge.
Divide by 4 you the quarterly charge.

So €101,000 at the beginning.
€99,000 at the end.
Interest rate 4%

€101k + €199k = €200k/2 = average balance of €100k
@4% = €4,000 per year
divide by 4 to give you €1,000 per quarter.

This is a rough guide.
 
In the first "quarter" , the interest may have been for only 6 weeks say.

Let's say that the average balance during the 6 weeks was €100,000

The the interest for 6 weeks should be

€4,000 a year / 52 weeks = €77 per week
x 6 = €462 for 6 weeks.
 
My thinking is the same as Brendan's. That you're not comparing the 2 periods equally.

When did you take out the mortgage?

Did something else change in the meantime? You mention the €5k over payment so you may be on a fixed rate with AIB. Did you fix your rate during the 2 periods you're comparing?
 

We took out mortgage in Oct 2023.
We fixed at 4.65%.
We paid the allowable €5000 in early December 23.
We paid the allowable €5000 in late January 2024.

The first period was from Oct till December 2023.
The second period was from January till march.

So looks like the lower amount was for a shorter period of time.
 
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