Annually and monthly compounded mortgage interest

[Scrag Meister]

I have a mortgage spreadsheet that I wrote years ago and has proved to be really accurate.

However, the figure from this for my daughters mortgage is 611.78 per month.

The mortgage compnay say its 617.55 due to componding annually.

Does that mean that repayments are stored and only credited once a year?

Thanks all.

[bluetoaster]

I have a spreadsheet for my own mortgage to track the total owed over time based on what I pay in (it is a flexible mortgage so I can overpay, then underpay later etc as I see fit). It has proven to be accurate to within a couple of quid per year.

I based it on the mortgage company applying compound interest monthly, so each month add on 1/12th the annual rate before deducting my payment. It probably varies from mortgage to mortgage as to how they are calculated though.

[northernladuk]

This site shows multiple and yearly compound calcs. Try sticking them in and see if tallys up with the bank?

Compound Interest Calculator

[Scrag Meister]

I have now worked out what Leeds Building Society is doing.

They only credit your monthly payments to the mortgage account once a year, so you accrue additional interest over the year.

They have your cash in their bank account for the year, no doubt earning interest external to the mortgage, AND they are charging you the additional interest.

What a con. May be not legally but compared to most of the other lenders it is not the norm.

[Notascooby]

I have now worked out what Leeds Building Society is doing.

They only credit your monthly payments to the mortgage account once a year, so you accrue additional interest over the year.

They have your cash in their bank account for the year, no doubt earning interest external to the mortgage, AND they are charging you the additional interest.

What a con. May be not legally but compared to most of the other lenders it is not the norm.

That's illegal under the payment services directive, which states in summarythat the bank can not gain from holding your money, hence the change to BACS+1. They should credit your mortgage account within 2 hours (immediate within the faster payments terms) or at least it should end up that wayeven if its via payment date etc.

So worth asking if this in within the spirit of PSD - it's a complaint based legislation, no-one is going to enforce it for you.

[SueEllen]

That's illegal under the payment services directive, which states in summarythat the bank can not gain from holding your money, hence the change to BACS+1. They should credit your mortgage account within 2 hours (immediate within the faster payments terms) or at least it should end up that wayeven if its via payment date etc.

So worth asking if this in within the spirit of PSD - it's a complaint based legislation, no-one is going to enforce it for you.

WNS

Just make sure you put the complaint in writing and it has the title "Complaint" on it. Otherwise they won't deal with it as such.

[Maslins]

I have now worked out what Leeds Building Society is doing.

They only credit your monthly payments to the mortgage account once a year, so you accrue additional interest over the year.

They have your cash in their bank account for the year, no doubt earning interest external to the mortgage, AND they are charging you the additional interest.

What a con. May be not legally but compared to most of the other lenders it is not the norm.

Wow, what a swizz! Imagine if the payday loans companies do that too...

[Ketchup]

They probably calculate interest daily, and you were calculating monthly