First installment with initial interest

rakeshunni

Hi guys

I'm a FTB and got my mortgage offer letter from halifax for 162K on a 30 yr period. I'm on a fixed deal and my monthly repayment is £1028. However, in my mortgage offer letter my first monthly installment is £1415 followed by £1028 every month. I'm still curious what could be the reason, my first monthly payment is almost £400 more? the document says first installment "includes the initial interest". What does that mean?

Thanks!

opinions4u

Interest from the date of completion to the end of the month plus a full payment for the following month.

I'd hazard a guess that you completed around the 20th of the month.

£1415 will cover your interest for September and your full payment for October.

rakeshunni

I'm buying a new built which will be completed first week of december. So my mortgage will start only on december. What exactly is the date of completion? Does that mean they'll charge you interest from the day they gave me the offer?

Also my offer letter says my mortgage will start mid November. but I'll be moving only in december. How can i change this?

Thanks for your response!

minimike2

You are charged interest from the day that they release the funds to your solicitors, so rather than have interest build up on that interest over the full 30 years, you pay it with the first payment. It works out better for you in the long run.

Tiddler_2

All Halifax mortgage offer letters make the assumption that your mortgage would complete on the 16th day of the month following the issue of the offer. So if you have got the offer in October it would assume it completes on 16th November.

I'm guessing the interest rate is around 6.54%

So a simple calculation would be (£162000 x 6.54%)/366 x 14 which gives a figure of around £405.

People often ask what is the best date to complete (with new build you don't normally have much of a choice!!) and it really depends on circumstances, as you only pay for the money for the length of time you (or your solicitors) have had it - worth checking to make sure it's not been sat in the solicitors account for a few extra days!!

If you are currently renting and have to pay rent for the whole month, then the best day to complete is as close to the end of the month as possible. Similarly, if your current lender charges you interest for the whole month.

opinions4u

minimike2 wrote: »

You are charged interest from the day that they release the funds to your solicitors, so rather than have interest build up on that interest over the full 30 years, you pay it with the first payment. It works out better for you in the long run.

Halifax actually charge from the date of completion, not the date of sending the funds to the solicitor.

A minor point in these days of telegraphic transfer, but handy if completion is delayed slightly.