Woolwich "Part interest payment"

xscope

Hi,

I have recently remortgaged my flat (Repayment mortgage) over 19 years and moved provider.

I have received my First Payment Notice, which states the following :-

Amount of borrowing released - £95,0000
Date of release of mortgage funds - 9th August 2008
Regular monthly payment - £693.34
Part interest payment for August £351.62
Total first payment due on 16th September £1,044.96
Regular monthly payments to be collected on the 16th of each subsequent month £693.34

I don't understand what the Part interest payment of £351.62 is for? They released the funds on 9th August, with a first payment made on the 16th September.
This means my regular payment would cover the interest and capital repayment from the 9th August to 8th September, so I owe then an additional 7 days interest to cover from the 9th September to the 16th? It seems they are going to charge me an additional whole months interest for these 7 days.

The explanation in the letter is "If applicable, the first payment will include, in addition to your regular monthly payment, a part interest payment to cover the period from the date of release of the mortgage funds until the end of the first month."

I contacted them and they state that I should allow this first month's payment to go out and then if I wanted, I could change the date of my payment to the end of the month. - this is no use to me, I get paid at the start of the month.

Have I got this wrong?, or are they ripping me off here?

Thanks,

maninthestreet

No ,they're not ripping you off - the interest starts accruing from the day the funds were released. So on the 16th September you have to pay the interest from 9th August to 31st August which is £351.62, plus the first regular monthly payment of £693.54. As the regular payment comes out in the middle of the month, it sounds like you are paying 2 weeks in advance, 2 weeks in arrears.

xscope

Thanks for the reply, which clarifies things somewhat.

I still can't see how you can pay interest in advance.

Surely as I haven't yet accrued that interest, how they can demand it in advance....

Locoblade

You aren't really paying much in advance though are you? The part payment covers interest up until 1st Sept which has already gone by, the rest of the mortgage repayment on the 16th covers the interest in the month you're paying, so at most you're paying 2 weeks of that in advance. I may be wrong but I think thats how most mortgage lenders calculate it, so the interest you're paying in that month's payment covers the interest for that month.

getmore4less

Woolwich is a bit funny here, most lenders add the interest the same day the payment goes out so don't have this issue.

With the Woolwich(Barclays) the interest is calculated daily on the outstanding ballance then added to the loan on the last day of the month the mortgage payments are made on the 16th(or close) and cannot be changed(with our T&Cs)

So the daily interest goes down on the 16th because the payment is made, then on the 1st they go up a bit because the interest from the previous month has been added. The mortgage payment comes off the capital owed, interest is added to the capital owed

Nothing to worry about all works out right in the end.

The actual payment is calculated based on a full year so it stays the same each month, even if interest only, people like the same payments.

It is all explained in the docs that came with our mortgage, this feature is part of the tracker T&C which come with the offset arrangemnt we have, the docs may have changed, worth a read so you understand some of the other things about the loan.

xscope

Thanks - that makes more sense now.