Just received rate change notice from my bank that it increases the rate by 0.09% for my PPOR. But the repayment in the letter actually drops a few dollars.
Why is that?
Home Loan Rate up but Repayment Drops
tooblue on 13/07/2018 - 13:15
Last edited 13/07/2018 - 14:21 by 1 other user
Last edited 13/07/2018 - 14:21 by 1 other user
Comments
And then someone will respond with
"they told me to post my question on Ozbargain"
I don't want to hear "Oops, we were wrong. Now your monthly repayment is $XX more."
Then you might just get another letter saying exactly that in a few days
No such thing as free money, you'll have to pay eventually
Is your repayment changing, or is your minimum repayment changing?
It may be that you have been making repayments above the minimum required?The new arrangements should be based on current balance x new rate x remaining duration of the loan.
What if I told you, you can simply google your problems
The interest rate caused your repayments to be recalculated based on balance of the loan. Had the recalculation occurred without a rate change you may have found that the repayment amount would have been even lower.
Most likely caused by the reduce interest and thus higher principle repayments caused by an offset account or additional repayments
Sounds legit ha
I don't think it works like that. You still pay the same repayment regardless of what is in your offset account. Just more goes off principle instead of interest if have lots $$ in offset.
Sort of
Not everyone has offset accounts, though. Olokun's explanation would make sense if OP is making extra repayments in to their loan/redraw.
Yep Olokun has nailed it. When the recalculation has occured, the life of the loan remains the same, and because the offset account has saved you some $$$ since the last time they did this, the repayments are re-calibrated to match the remaining life of the loan. More in the offset = greater calibration.
had you not had an offset, made no one off payments, and only paid the minimum, this would of raised the repayments but it didnt due to one of those factors.
Makes sense.
So in theory our repayment should reduce bit by bit every month because the principle reduces by month. In reality the repayment is only recalculated when there is a rate change.Or when you request for it to be done
I noticed the same thing - I am with the bank that sees dead people.
I noticed that they have been taking less than the agreed repayment account out of my account.
Have not yet looked into how long it has been going on for.
Yep, so your new repayments are based on the current loan balance, remaining term of loan, and interest rate.
Repayment reduced generally means you managed to pay down your loan faster than the original projection. Offset account, additional repayments, even making fortnightly rather than monthly repayments will contribute to this.
The trick is though, if you can afford it, just keep repaying the same amount and keep doing what you are doing. From what you are saying, you are ahead with your mortgage, if you change your repayments to the new, lower amount, the bank gets you back on their most profitable path.
They have changed the agreed repayment rate without my consent. I was paying double what I should be for that is what I wanted to pay
I dont entirely understand your statement. Repayments vary over the term of your loan due to prevailing rates and your balance. lenders have the right to change interest rates, thereby changing repayment amount, they dont need your consent… having said that, unless you are on a fixed term loan, you can always change lenders
so what bank increased .09 ?
what is the interest rate after the increase ?
i'll tell you what everyone else will say…
what did the bank tell you when you called them?