Overpayments and mortgage interest

N

New-Red

Registered User
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57
Hi,

We have been paying off a good few bob on the mortgage in last few months. By lobbing in a few hundred here and there via banking 365 (Bank of ireland variable rate)

So we had got the mortgage balance down to around 20,600. However now they've added on the quarterly interest and its back up at 21,100.
So it seems we've been charged 500 quid interest.

Is that not very high considering how low the balance is?

Do they not take into account all the overpayments when calculating interest?

Should I have been ringing them asking them to count the overpayments towards it?

I assumed it would have been done automatically. Was I mistaken?

Or does it sound about right?
 
The interest is charged on the balance, after the extra repayments are taken off it.

It's easy enough to work out roughly.

Add the balance as the start of the period to the balance at the end of the period and divide by 2. (This gives the average balance)
Multiply by the interest rate
Multiply by the number of months

For example if you are looking at a quarterly interest charge

Average balance €22,000
Annual interest €22,000 @4% = €880
For a quarter €880 x 3 months/12 = €220

Brendan
 
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