when do i start mortgage/receive £££ to avoid paying interest on first repayment ?

jonhoggy

In my mortgage offer document it details "interest charged in the month of advance, payable with your first full monthly payment" - this figure is nearly as much as my first payment and will wipe me out !

is there any way of avoiding incurring this additional interest or keeping this to a minimum ?

also will i need to tie this in with receiving mortgage loan to pass to my solicitor for a completion date ?

ie does it matter when i receive this too as to when interest starts or will this only be tied in with the first mortgage payment ?

will appreciate any help

hostman

Is this a new purchase?

Your solicitor should get the timing right, so any extra amount to pay is minimal.

I'm not 100% certain on how they avoid paying extra, as I'm in a similar boat, first time buyer with a purchase going through now, been approved by lender etc, waiting on the solicitors to do their thing.

I imagine the completion date is on or soon after the date your lender will be due to take first payment?

lkk88

Hi I completed on 17th September, my 1st mortgage payment being 1st October. My first payment is 1 full month + interest from day of completion which makes my 1st payment one and a half times the normal monthly figure. (being my first purchase my monthly payment is mainly interest) So if we had completed later the payment would have been lower. You need to find out 1st from the mortgage company when the first payment is and what it covers (which I think you stated anyway...) then work with your solicitor to get a completion date that means it is affordable for you - that is what we done. Our mortgage offer also actually told us what our first payment would be if we moved in on such and such a date so we based it on that.

jonhoggy

ok thanks,

so if i arrange completion date for end of month and mortgage to start on 1st of following month i should avoid additional costs incurred by interest

i will aim for that !

Baz_2

Ive never understood this.

That means your paying your interest on the second payment and all future payments one month in advance. Which is nuts IMO.

Abbey didn't do this to us when we took our mortgage out with them. We moved in on the 13th and the first payment was taken on the 13th the month after, just a single monthly payment.

I then rang them and told them to change the payment date to the 1st and that resulted in a smaller payment for the second month and then back to normal every month after that.

Surely they can't make you pay your interest in advance. I hope Yorkshire BS don't try to pull that trick on us when our remortgage goes through in a few months.

getmore4less

jonhoggy wrote: »

ok thanks,

so if i arrange completion date for end of month and mortgage to start on 1st of following month i should avoid additional costs incurred by interest

i will aim for that !

The money will need to be available the day of completion so most solicitors get it the day before.

You should be able to reduce the effect of this payment or another simple way is to borrow an extra month payment up front so you can cover any requirement.

I would have a good read of the T&C to make sure you understand how the interest works, then if you want to make overpayments you get them right.

I like my Barclays/woolwich mortgage T&Cs, simple and easy to understand they calculate interest daily, add it once a month, all payments come off the capital owing.

skubelliott

Hi
My fianc! and I have recently secured a new build property. We have had our mortgage offer through today and are confused with the interest charged in the month of advance. I understand that this is the interest charged between completion date and first payment, but what is classed at a completion date?

Is it the date that we exchange contracts or the date we move in/house is complete? (which will be feb/march 2011) or is it a totally different date???

Many thanks in advance for your help, I know I can speak to my lender and developer but would appreciate your info too, thanks!

Elliott

TrickyDicky101

To the OP: there is no additional interest to pay: standard mortgage terms are for repayments in advance ie first repayment is due the day the mortgage is taken out (this reduces the headline mortgage interest rate and the monthly repayments slightly compared to a repayments in arrears basis, which is presumably why banks do it like this). If you start your mortgage on a non-repayment day, then you do not make this first repayment on the same day you take the mortgage out. Thus, you will need to pay interest from the date the mortgage is taken out to the date of your first repayment. This can sometimes lead to a first repayment nearly twice your normal monthly repayment. Whilst perhaps counter-intuitive, at no point have you suffered unwarranted additional interest - it's just the way banks arrange mortgages.