I had a fixed rate mortgage for 2 years BUT payments on yearly statement go up and down - why?

Although the amount you pay the mortgage provide never alters the way they proportion the money does. Two factors influence this.

1. The amount of days in a month - the more days the more interest you pay and less off the balance.

2. Every time you make a payment you reduce the amount you owe and therefore pay less interest.

Lets say you borrowed £100,000 on the and paid back £500 the first month (assume January) of which £300 was interest and £200 came of the amount you borrowed.

By month two you only owe £99,800. If you assume month two is Febuary which is the shortest month you will still pay back the same £500 but £280 may be interest and £220 off the loan meaning you now owe £99,590.

Month 3 (March 31 days) you will still pay the same £500 but you £295 maybe interest and £205 off the capital - because whilst it has the same number of days as January you actually owe the bank less money.

Hope that make sense.

Hey there,

Well first of all your payment will always stay the same but over the life of your loan, you will notice that more and more of your money is being applied to the principal balance of your loan (what you owe) and less of your money will be going to interest payments. Once you get a fixed year mortgage you will notice that most of your payments go entirely to interest payments and that your mortgage balance is going down at a very slow rate. However, as time goes by this will change and you'll notice the exact opposite effect. I suggest checking out some of Dave Ramsey's material to help you understand better.

With a fixed mortgage, payments will stay the same. What changes is the amount of interest and principle you pay each month...

After every payment, the principle balanced owed goes down so the next months interest is based on a lower balance owed.

So the payment has a little less taken out for interest and a little bit higher amount taken off the principle. These two numbers will change after every payment.

Because of the change in the principal of the loan. As you pay the loan it goes down and this makes the the amount of the principal and interest change. Its nothing to worry about. But if you have more reason to be concerned you should contact your mortgage company.

it may be a simple interest loan, so unless your payment gets credited the exact same day every month, the interest portion will vary from month to month and the longer you wait to make payment the lower the principle amt will be for that payment - I have a loan like that on a rental home I own

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That's a good question, and one you should ask the loan servicer. There should be a phone number on those statements. Call them.