Mortgage interest - overcharged

C

collydale

Registered User
Messages
10
Hi,

Is there a fixed formula to calculate the amount of interest to be applied to the mortgage? I am pretty sure my bank has applied to much interest to my mortgage account this quarter.

I am on a tracker so the rate has not moved, and yet the interest applied has gone up this quarter as against the previous three quarters, I had not missed any payments or made any late payments, so I don't think the interest could possibly have gone up?

I have calculated by using the formula - principle x interest rate x number of days/365, and I have got a lower figure than the interest actually applied to the mortgage.

I am just wondering if there is a specific formula, I don't necessarily want to bring this to my banks attention until I am certain that the error is that they have charged me too much this quarter (rather than they had charged me too little interest in the past!).

Thanks,

Donal
 
Probably a simple explanation.
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Drop a note to your lender and query why quarter 1 + 2 @ same interest rate end up at less cost than this quarter.
You will (I think) find they will respond.
If you are worried they charged you too little previously ,that does not matter ,given that they work on outstanding balances, so you won,t be suddenly hit for a bigger bill.
It may just mean future repayments/interest will be a bit dearer.

(I assume the overcharge is not too much)
 
gdonal said:
I am pretty sure my bank has applied to much interest to my mortgage account this quarter.
Click to expand...
Not impossible but highly unlikely! All banks now have a highly efficient daily interest calculator built into their computerized accounting system. The system calculates all interest on a daily basis using the same formula (only difference being the applicable rates). If the system goes wrong all interest bearing accounts are effected and this would be a calamity for any bank. This is why there is a regular check on the system to ensure its always operating correctly.
Remember that interest is charged on a daily basis on the outstanding balance on that day. The formula you have outlined above would only apply in a scenario where the balance and interest rate remained unchanged for the period in question. having said that ongoing repayments should reduce the total interest charged over the period. By all means take up your query with the bank if your not satisfied that the figure is correct.
 
Thank you both for your replies.

Unless I am missing something (which is absolutely possible!) in circumstances that the rate has not changed, and no payments have been late (and no payments have been missed), and the principle has therefore obviously reduced - as I understand it the interest applied from one quarter to the next can only come down (albeit very slightly). I track it and the amount of interest applied each quarter reduces on a consistent level from one quarter to the next, so for it to suddenly go up now seems like there must be a mistake. it is not a large overcharge, but enough for me to immediately think there was a problem.

The interest applied in September is more than was applied in December for Q4 last year (same rate), despite the fact that nine repayments have been made in the meantime and so the principle has reduced.

I will contact bank and let you know if I get anywhere.
 
Not every quarter has the same number of days. July and August are two consecutive months quarter with 31 days.

If you do want to query with the bank try phoning them, that way you are less likely to cause any side effects. You can always write if still not satisfied.
 
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