Why can't banks and building societies do this?

juji

In this current economic climate a lot of people including myself are paying interest only on their loans and mortgage, so you pay hundreds if not thousands of euro a month over the year and then you get your statements in and hey presto, the amount outstanding has gone up :mad: and if you are like me you feel sick to the pit of your stomach! So why can't these banks and building societies take your payments off the principle loan amount which would bring down the loan, hence reducing the interest on the loan I think this is the least they should do considering we are all in this mess because we bailed them out!

We should organize a march (like the pensioners did) to demand this.
United we stand, divided we fall!

SkepticOne

juji wrote: »

So why can't these banks and building societies take your payments off the principle loan amount which would bring down the loan, hence reducing the interest on the loan

So you would get same benefit that normal mortgage holders get without the extra capital repayments that they also make? Doesn't seem particularly fair to be honest.

OMD

juji wrote: »

In this current economic climate a lot of people including myself are paying interest only on their loans and mortgage, so you pay hundreds if not thousands of euro a month over the year and then you get your statements in and hey presto, the amount outstanding has gone up :mad: and if you are like me you feel sick to the pit of your stomach! So why can't these banks and building societies take your payments off the principle loan amount which would bring down the loan, hence reducing the interest on the loan I think this is the least they should do considering we are all in this mess because we bailed them out!

We should organize a march (like the pensioners did) to demand this.
United we stand, divided we fall!

So you want an interest only mortgage and you want tax payers to fund the difference. Eh, no thanks

juji

SkepticOne wrote: »

So you would get same benefit that normal mortgage holders get without the extra capital repayments that they also make? Doesn't seem particularly fair to be honest.

I am a normal mortgage holder, but like thousands of others I have lost my job and can no longer afford to pay my full mortgage repayments.

Cookie_Monster

For the same reason banks don't give out free money.

Why would they allow you to pay back only the principle, the value of what you pay back is then less than you borrowed due to time factors.

lmimmfn

juji wrote: »

paying interest only

kinda says it all really though?

hinault

You're a normal mortgage holder.

You lost your job sadly and you're now paying the interest only.

Maybe I'm missing something here but you're saying that the principle has increased????

I would have assumed that the principle would have remained at the same level
when you stopped making full mortgage repayments and started paying interest only?

Are you sure that the principle has increased?

soden12

Banks don't care - they are there to screw you whilst their staff retain their 10:00 opening hours, subsidised loans, free gym memberships, fee car loans, free uniforms, hefty allowances for working in a bank, discounts from local retailers. Oh and they get extra days off at Christmas and Easter.

tenchi-fan

I think the op doesn't understand how loans work.

Year one, the mortgage is €100,000.
Customer pays €10,000 in repayments in year 1.

Obviously in early years the bulk of the repayments goes towards interest.

From my reading of the op's post, the op thinks the banks should reduce the principle first. The €10,000 will reduce the mortgage to €90,000, allowing the customer to pay off their loan in 10 years rather than 20.

It completely ignores the fact that mortgage interest rates are 5%, and this amount effectively increases the remaining balance on the loan each year.

Furthermore, most people's repayments are so low it doesn't make much of an impact on the original loan amount. People will pay back €6000 a year even though the interest alone is €5000.

hinault

tenchi-fan wrote: »

I think the op doesn't understand how loans work.

Year one, the mortgage is €100,000.
Customer pays €10,000 in repayments in year 1.

Obviously in early years the bulk of the repayments goes towards interest.

From my reading of the op's post, the op thinks the banks should reduce the principle first. The €10,000 will reduce the mortgage to €90,000, allowing the customer to pay off their loan in 10 years rather than 20.

It completely ignores the fact that mortgage interest rates are 5%, and this amount effectively increases the remaining balance on the loan each year.

Furthermore, most people's repayments are so low it doesn't make much of an impact on the original loan amount. People will pay back €6000 a year even though the interest alone is €5000.

OK.

But having repaid both the interest and the principle in the early days, there should be no increase in the principle from the date when the mortgage holder switched to repaying interest only.

Unless I am reading his post incorrectly, the OP wrote that the principle had increased after he had transferred to interest only repayment.

Surely the principle should remain at the level it was at, the day he transferred to making interest repayments only?
(the principle today should not be at a higher level on the day that he transferred to making interest only repayments).

Kristopherus

Unless the Bank piled on a heap of charges on him for changing. And added those charges to the Principle:eek:

Amhran Nua

Kristopherus wrote: »

Unless the Bank piled on a heap of charges on him for changing. And added those charges to the Principle:eek:

Seems the most likely reason here, and if true would need to be looked at very quickly.