Calculating Mortgage Repayments

[Alan Medic]

I visited the bank this week. My current rate expires soon. I didn't want to change the term, I knew the rate I wanted and I also requested a figure for borrowing some more (at the same rate). This is the reply I got when I emailed him after the appointment when requesting to know how much interest I would be paying:

"Regarding your question about how much interest you will pay back over the duration of the mortgage term, this is actually a very difficult question to answer due to a term called compounded interest.

Essentially, your mortgage generates interest on a daily basis which in turn changes depending upon your mortgage balance as well as the amount of days in the month i.e. the mortgage will generate more interest in January than it would in February. Because of this, I cannot give you a definitive answer to your question because your mortgage balance, and subsequent interest this generates, will change slightly from month to month and never remains stable."

What do you make of that reply? I'd have thought it would be relatively easy to work this out given no variables. I haven't bothered trying myself but I did cover compound interest in school though I'm a bit rusty on it.

[Henry_17]

Alan,

The reply is BS. All they need to do is make an assumption about the timing of your payments and have access to a calendar. I would be amazed at a bank that did not have software which can do this.

He is essentially saying he can't predict what length future months will be which of course is a matter of fact not speculation.

I would borrow as much as you ca from this man as he seems like an imbecile.

[Siduhe]

If what he's saying is that he can't work it out for himself - then I guess I can see that. But he should certainly have access to the info or be able to get it, not least because it's something which banks have to share at the outset of a consumer loan (total cost of credit over the life of the loan) so you can compare options. That may not be the case for first charge mortgages which are regulated differently from loans, but I would be astonished if the bank's modelling of the loan didn't have a figure for the total charge for credit over the life of the mortgage (assuming no defaults and no early payments) and that they couldn't share it with you.

[DaveR]

http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator

[Mick Mac]

DaveR Wrote:

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> http://www.moneysavingexpert.com/mortgages/mortgag

> e-rate-calculator

that's cool. I have my own excel model that does it, but that link is much easier.

[Alan Medic]

Oh another think I learned is that the minimum loan this bank will loan is ?10k. Has this become standard practice with banks?

[LondonMix]

HSBC has an online tool that can help you see this as well.

So of course it can be worked out but perhaps your bank doesn't provide the reps with such a tool...

[Mick Mac]

Alan Medic Wrote:

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> Oh another think I learned is that the minimum

> loan this bank will loan is ?10k. Has this become

> standard practice with banks?

Probably - to take additional security over your property it has to be a reasonable amount and for smaller amounts they'd probably expect you to be able to pay it off under personal unsecured loan terms and periods.

[DaveR]

DaveR Wrote:

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> [www.moneysavingexpert.com]

> e-rate-calculator

that's cool. I have my own excel model that does it, but that link is much easier.

There are a whole series of calculators on that page that are very useful - product comparison, overpayment calculator, and offset mortgage vs savings accounts.

[Alan Medic]

Mick Mac Wrote:

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> Alan Medic Wrote:

> --------------------------------------------------

> -----

> > Oh another think I learned is that the minimum

> > loan this bank will loan is ?10k. Has this

> become

> > standard practice with banks?

>

> Probably - to take additional security over your

> property it has to be a reasonable amount and for

> smaller amounts they'd probably expect you to be

> able to pay it off under personal unsecured loan

> terms and periods.

Yes but as the loan (if I take it out) is being added to the mortgage I currently have, which allows me to pay of an additional 10% of the borrowings annually, what's to stop me paying off what I don't want as soon as the funds are released? He didn't answer this question either.