Let me take another approach to this.
1) A shop overcharged me by €1,000 one year ago. When they refunded me the overcharge they paid me 2% interest to reflect the TVM.
2) I had a mortgage of €100,000 a year ago. The interest rate was 2%. And I was on a full payment moratorium so I paid nothing during the year. The balance I owe today is €102,000
3) I had a mortgage of €100,000 a year ago, the interest rate was 2%. I was on a full payment moratorium. But the bank overcharged me by €10,000 a year ago.
Today the balance is €112,200 (€110,000 +2%)
Now the bank tells me that they overcharged me, so they recalculate the statement by eliminating the charge of €1,000. The balance today is €102,000. I am back where I should have been. No gain, no loss.
4) Example 3 above, but this time I chose to make a payment of €50,000 on 1 January.
It makes no difference. I will still get a refund of €10,000 +2%. or €10,200
A completely different example to show that overpayments don't matter
1) I had a €100,000 mortgage on 1 January on an interest rate of 2% with 20 years remaining.
The monthly repayment was €506
The balance at the end of December was €95,900
2) The bank charged me the right interest but calculated the repayments over 10 years.
I paid €920 per month
The balance at the end of December was €90,900
To rectify this situation, the bank simply pays me €5,000 and increases the balance back to €95,900
Brendan