Capital/Monthly Repayments on Tracker Mortgage

[johnkieran]

I had/have an interest only (tracker @ 0.95%) mortgage for €260,000 with my bank which had a redemption date of 31st August 2018. The bank didn't contact me to say the capital was due to be repaid and when I contacted them a few days before the redemption date they advised me that the redemption amount was €260,780. When I asked where the additional €780 came from I got some woolly answer about the way interest was calculated. I asked for an explanation of this €780 to be given to me in writing which I never received.

Most surprisingly they also advised me that the redemption date had been moved out for 12 months and I now had until 31st August 2019 before having to clear the loan. I have to say I was amazed when I was told this.

I decided to repay the capital sum pending seeking further clarification on the €780 so forwarded a cheque for €260,000.

I received a correspondence a week later which stated (and I quote): "We have lodged the payment to your mortgage to reduce the balance. Your monthly repayment of €206 will remain unchanged because of the arrangement you have in place with us".


Two questions:

1) is shoving out the redemption date out by 12 months normal practice?

2) more importantly, can they continue to charge me €206 per month even though the loan balance has been reduced to €780?

 

[RedOnion]

Have you got your mortgage statements showing transactions / balances?

When you are on interest only, the amount of actual interest charged is based on the number of days in the month. In your case, 188.48 in Feb, or 209.78 in January.
The bank tries to even it out, and collects about 206 each month, so there will be small differences, that should balance out over time.
Another place it can go wrong is when there's a change to your rate, but they can't change the collection amount in time - for example you must receive 14 days notice of a DD amount changing, but typically a tracker rate must be changed within 5.

When you're paying capital as well, these differences get lost, but are obvious on interest only. A difference of 3 months interest is very high though, so you'd need to analyse your statement to see when it started.