Is arrears on a mortgage interest only

S

sellornot

Registered User
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These may sound like stupid questions

1. Is the arrears on a mortgage made up of interest only? I am thinking of paying interest only for the moment.

outstanding balance including arrears = 250k.
Arrears = 85k.
Monthly payments = €1245.63
Interest rate = 4.49%

Interest is approx €1,000 per month i am guessing
can anyone brake this down for me?

2. If I was able to pay off the mortgage in full do you think the bank would still need me to submit a financial statement?

Sellornot
 
It's not a stupid question at all. Most people have no understanding of what arrears means and how meaningless the figure is. I ahve a key post on the topic here

http://www.askaboutmoney.com/threads/understanding-what-arrears-actually-means.172163/

To understand, it forget about it completely for the moment.

You have a mortgage of €250k @4.5%, so the interest is €11,250 per year.

If you pay €1,000 per month, you will pay the full interest + €750 off the capital. So at the end of the year, you will have reduced your mortgage to €249,250.

If you pay more than the interest, you reduce the balance.
If you pay less than the interest, the balance on your mortgage will increase.


Now let's look at arrears, which is a measure of the payments due but not made

sellornot said:
outstanding balance including arrears = 250k.
Monthly payments = €1245.63
Interest rate = 4.49%
Click to expand...

As the repayment due is €1,245 but you are paying only €1,000 - the arrears figure is increasing by €245 per month. Don't forget, that the balance is coming down, it's just the arrears figure which is rising.

If you had only 20 years to go on your mortgage, you would have repayments due of €1,600 per month. Your arrears would be rising by €600 per month.

If the lender switched the loan to interest only, and you paid the interest, then you would have no new arrears.

Brendan
 
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sellornot said:

2. If I was able to pay off the mortgage in full do you think the bank would still need me to submit a financial statement?
Click to expand...

No, why would they want to have one if you pay it off. You pay them get a discharge from your mortgage and that's the end of the mattter.

You sound like you need to do a full post on what it is you are at.
 
The banks sometimes spin an arrears position when describing it during repossession hearings to make it sound worse than it is.
 
Bronte said:
You sound like you need to do a full post on what it is you are at.
Click to expand...

I did a full post on this, I just can't find the post now

I am thinking selling another property to pay the bank to dissolve a partnership
I offered the bank what was borrowed, but they have asked both borrowers to submit a financial statement, It looks like I may have to offer the full amount which is about €250K we borrowed €227.500 I thought they would go for that
 
sellornot said:
2. If I was able to pay off the mortgage in full do you think the bank would still need me to submit a financial statement?
Click to expand...

sellornot said:
I offered the bank what was borrowed, but they have asked both borrowers to submit a financial statement,
Click to expand...

You owe the bank €250k. If you pay that, they won't want any further information.

If you want a discount of €22,500, they are unlikely to give it to you - especially if you own another property.

Brendan
 
Brendan Burgess said:
If you had only 20 years to go on your mortgage, you would have repayments due of €1,600 per month. Your arrears would be rising by €600 per month.
Click to expand...

I think there is 8 years left on the mortgage. not sure if that makes any difference

I thought the monthly payments remain the same, but would change if the interest rate changes

So if I pay the €1,245 every thing remains the same is that correct?

If I paid the arrears of €85k what happens to the mortgage

Thanks in advance Breandan for your help

Sellornot
 
sellornot said:
I think there is 8 years left on the mortgage. not sure if that makes any difference
Click to expand...

Your figures make very little sense to me.

The number of years to go and the arrears figure have very little relevance.

They key thing is the balance on the mortgage. If the balance is €272,500 that is what you owe.

Brendan
 
quick question, would it be usual for my arrears to be charged interest on a daily basis?

sorry if I'm butting in.

Dub Dave
 
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