Voyant Query: Overpayment of Interest Only Mortgage
Gustavo_Fring
Member
Hello, I'm struggling to replicate this scenario in Voyant.
A client has an outstanding Interest Only mortgage of £305,933 @ 1.89%, maturing in 9 years. The monthly payment is £487 (representing the interest), however the client has told us he is paying £2,250 (so presumably there is an element of repayment of the loan going on too).
If I simply increase the monthly payment, the 'Interest Only' check box is automatically deselected and the loan assumed to include principle.
Does anyone have any ideas on how to model this, or am I going back to the client for more details?
Thank you.
Comments
I would do this:
As your client is overpaying you now have a repayment mortgage of £305,933 with an interest rate of 1.89%. The monthly payment is £2,250. Just enter in these details (you get a repayment term of 8 years). It's probably not perfect as it depends on how the lender applies overpayments / calculates interest, but it's a good place to start a plan with.
Thanks, yes I will give that a try. I suppose the downside is that it won't accurately show the capital payment required at the end of the mortgage term but a compromise is going to have to made somewhere....
Hi, I've tried this approach and i'm getting a repayment term of 13 years on this. How did you get 8?
Sorry - add a payoff event in 8 years and under advance settings use this to set when the mortgage balance is repaid.
Ah, yes thank you. This worked and I ended up paying a lump sum of £99K after 8 years. Hopefully we are in the right ball park!