Key Post How to check your mortgage statement

[Brendan Burgess]

This has come up a few times, so I will try to explain it.

First the very basics on a simple mortgage with no arrears, TRS or any other complications.

 

[Brendan Burgess]

Let's look at the simple arithmetic first

The opening balance was 306,709.03
A repayment of 3871.31 was made on 15th January, so the balance was reduced to €302,837.72.

On 16th March interest of €490.90 was added, so the balance increased from 295,095.1 + 490.9 = 295,585.00

 

[Brendan Burgess]

The first thing to check is the rate of interest.
This is a tracker mortgage of ECB +0.6%

You can check the calculations roughly. In the first Quarter, the average balance was about €300,000
€300,000 @.065% = €1,950 per annum
for a quarter, that would be about €487.50

So the charge of €490 is correct.

 

[Brendan Burgess]

Now let's look at a mortgage in arrears.

This lender provides two separate statements - The Loan Statement and the Arrears Statement.

The Loan Statement is the same as the example above.

They charge interest every month.
This borrower pays €120 each week.
The balance goes down whenever a repayment is made and goes up again when interest is added.

The Mortgage Arrears Statement for the same period is as follows:

This is telling the borrower what repayments they should have made and what they actually made, therefore how much they are behind.

At the end of August this account was in arrears of €21,050.47
On 1 Sept a repayment was due, so the arrears balance went up by this amount to €21,740.52.
When he made a payment of €120 on 5th Sept, the arrears balance went down.

 

[Brendan Burgess]

The key thing to understand about the figure for arrears is that it is only a memorandum figure.

It does not affect the amount due on the mortgage.

If this borrower paid nothing at all during 2017, the mortgage account balance would rise by the amount of interest charged c. €2,800.

But as the amount due is €8,280(€690 x 12), the arrears balance would rise by €8,280.

If the borrower pays a one off lump sum of €10,000 off the loan, the mortgage balance would fall by that amount and so would the arrears.

 

[Brendan Burgess]

So what does "capitalizing arrears" do?

If the lender agrees to capitalize the arrears, all they are doing is setting the balance on the Mortgage Arrears Statement to zero.

It does not affect balance due on the mortgage.

 

[Brendan Burgess]

Some lenders make it even more difficult to understand.

There is only one statement with a separate column for arrears. But the principles are the same.

I can't find one of these statements but I think ptsb's is very complicated. If someone sends me a ptsb statement in arrears, I will use that as an example.

Brendan