Interest only repayment amount

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LawFully

Registered User
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hi-had to come to an interest only arrangement with BOS a few years ago for a mortgage of 187K.
Have paid 25 off in the past two years but Pepper are charging us as if we still owe 187k.
What action can we take or is this standard practice in such a case?
thanks
 
If you are only paying the interest then your capital amount owing wont change (i.e. it will remain at E187k).

You state you have 'paid off E25k' in the past 2 years - do you mean you've reduced the capital amount owning to E162k?
 
LawFully said:
hi-had to come to an interest only arrangement with BOS a few years ago for a mortgage of 187K.
Have paid 25 off in the past two years but Pepper are charging us as if we still owe 187k.
What action can we take or is this standard practice in such a case?
thanks
Click to expand...
As the other poster said if its interest only the capital amount remains,

The 25k you paid, unless it was outside of this arrangement, was just servicing interest
 
Thanks for your replies, and apologies for not making it clear.As well as servicing the loan, I have reduced the balance by 25k in the past two years, so that the outstanding amount is now 162K.
However Pepper are calculating the interest payments as if the balance was still €187. Is there any reason that they should see fit to do this?
 
LawFully said:
However Pepper are calculating the interest payments as if the balance was still €187. Is there any reason that they should see fit to do this?
Click to expand...
As in Pepper are still collecting the same repayment each month?

That happens sometimes, your arrangement most likely has a manual setting that you have a repayment of 'X' per month. They should be calculating interest on the actual balance, so your repayment should be paying off a little capital each month now.
The big downside of such an arrangement is when interest rates rise they might not review the repayment amount, so you might not be paying enough to cover interest.

Ask Pepper about it, and get them to issue a statement so you can see what's happening.
 
RedOnion said:
That happens sometimes, your arrangement most likely has a manual setting that you have a repayment of 'X' per month.
Click to expand...

Yes, it's very likely that the BoS arrangement meant a fixed repayment per month for the period of the agreement.

Brendan
 
The repayment amounts have increased with every rise in the ECB rate.We are informed of the amount of the new repayment every time the rate rises.But this repayment is always based on the original loan value rather than the actual outstanding amount.I will talk to them tomorrow but wanted to see if this was standard practice so I know whether to pursue it if its simply wrong.
 
The monthly amount does usually stay the same… just every month you pay the capital is decreasing as more of a % is being actually paid off the total amount. The first few years most of the monthly payments are interest, the last few years it’s mostly capital

The karl Jeacle calculator is really good visual/pie chart of this
 
Hi Lawfully

There are two separate issues which you need to think about separately.

1) The interest charged on your loan
2) The repayment you are making


You should make sure that they are charging you the correct interest. It's fairly easy to check roughly if you have a statement.

1) Check that they are applying the right interest rate.
2) Multiply that interest rate by the balance
3) Divide that figure by 12

That will be near enough to show you whether you are paying interest on €187k or €162k.

I would be very surprised if they were calculating the interest incorrectly.

How to check mortgage calculations is set out more comprehensively here:

Key Post - A guide to mortgage repayment calculations

As always, comments, corrections and suggestions for layout very welcome - Brendan There have been a few questions on askaboutmoney which have been very difficult to answer without explaining the background to mortgage calculations. For example: Bank of Scotland offer to write off my...
www.askaboutmoney.com
 
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