Timing of monthly repayment & interest charge

L

laragh

Registered User
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We came off fixed rate mortgage with NIB 2 months ago and am now on their tracker rate.
My monthly repayment is being transferred to the mortgage account on 14th of the month as this was the date the new mortgage was finally approved.
However I notice that the bank still charge interest to the mortgage account at the end of each month (usually on the last working day of the month)
Would I be correct in saying that I am then effectively getting charged interest on the interest for 14 days until the mortgage payment transfers accross?
I presume it would be better to have the mortgage payment going in at the same time interest is charged to avoid this double interest charge?
 
How do NIB calculate interest - e.g. daily or monthly? If it's the latter then you will always pay a full month's worth of interest regardless of when the repayment is made. Your loan agreement should clarify how interest is calculated.
 
Clubman,

Nearly sure that it's daily - I don't have a copy of the loan agreement to hand to check.
I do remember checking this with them as regards making overpayments against the principal and I think that it was daily calculations of interest.
 
If they calculate it daily then any capital repayment portion of your regular repayment should reduce the capital outstanding immediately it's paid into the account and you should not pay interest on the capital amount thereafter. Maybe you are misinterpreting your statement?
 
Went back and checked my statement online- this is what is happening (using example figures)

Mortgage balance @ 30/04/08 - €100,000
Interest charged @ 30/04/08 - €375
New Balance @ 30/04/08 - €100,375

My monthly payment will come in on 14th May but until that time I'll have been paying interest on the interest.

Am I right on this?
 
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I have a NIB tracker. Interest is calculated daily and charged on the last banking day of the month.

Using your example you will pay interest on €100,375 for 14 days, your balance will then reduce by your repayment amount and you will pay interest on this reduced amount until the last banking day of the month, then the current month’s interest will be added and the whole cycle starts again.

You are right, but you are only paying interest on what you owe, it’s calculated on a daily basis, so what date in the month you repay should make no difference.
 
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