Interest Daily v Monthly on a Mortgage

andrewmp

My interest is currently calculated on a monthly basis, my building society is merging with another which calculates interest on a daily basis.

Will I be any worse/better off? If so, by how much per £100,000?

Thanks

HelpWhereIcan

The quick answer is that you are unlikely to see any change. Unless they decide otherwise, the new lender is more than likely going to continue you to charge you interest on a monthly basis as per the mortgage you agreed with them.

However, if they do decide to convert you to daily interest you should, in theory, be better off especially if you overpay.

How much by will depend on the interest rate and the remaining term of your mortgage.

In practice it is not likely to be as big a saving as some would believe or hope. The main saving is to be made by switching from annual to daily/monthly interest but the mathematical saving is there.

andrewmp

HelpWhereIcan wrote: »

The quick answer is that you are unlikely to see any change. Unless they decide otherwise, the new lender is more than likely going to continue you to charge you interest on a monthly basis as per the mortgage you agreed with them.

However, if they do decide to convert you to daily interest you should, in theory, be better off especially if you overpay.

How much by will depend on the interest rate and the remaining term of your mortgage.

In practice it is not likely to be as big a saving as some would believe or hope. The main saving is to be made by switching from annual to daily/monthly interest but the mathematical saving is there.

Interest rate is 6.09% Remaining term is just under 29 years. They have confirmed I will change to daily interest calculations. I haven't overpaid anything yet but hopefully will in the future.

Joe_Bloggs

@andrewmp
Which building societies are merging in your case ?

It is sad when the choices of lender that a consumer can choose from are reduced. I don't think that the merger of Lloyds/TSB/Halifax/Bank of Scotland assist consumer choice.
J_B.

andrewmp

Joe_Bloggs wrote: »

@andrewmp
Which building societies are merging in your case ?

It is sad when the choices of lender that a consumer can choose from are reduced. I don't think that Lloyds/TSB/Halifax/Bank of Scotland assist consumer choice.
J_B.

Scarborough (mine) and Skipton. They're going to be the 5th biggest they say. If I was on an offset I could leave penalty free but I'm not.

It seems I won't be worse off with daily interest though.

dixie_dean_2

I'm on an interest only deal and in the same position. The loan is about £110,000 at 5.2% (i think) - any idea how much worse off I'll be?

Another question - my monthly payment date is changing from the 28th in arrears to the 1st in advance. They anticipate changing over on 30th March and giving you the choice to either skip your old March payment and pay on the 1st with this being added to the loan or to pay both. Somehow I feel like I am losing out here but I can't quite get my head round it. It feels like I'm still paying the same but will owe an extra £500 ish quid or I have to find an extra £500 from somewhere. Any help on any of this would be much appreciated.

Thanks in advance.

andrewmp

dixie_dean wrote: »

I'm on an interest only deal and in the same position. The loan is about £110,000 at 5.2% (i think) - any idea how much worse off I'll be?

Another question - my monthly payment date is changing from the 28th in arrears to the 1st in advance. They anticipate changing over on 30th March and giving you the choice to either skip your old March payment and pay on the 1st with this being added to the loan or to pay both. Somehow I feel like I am losing out here but I can't quite get my head round it. It feels like I'm still paying the same but will owe an extra £500 ish quid or I have to find an extra £500 from somewhere. Any help on any of this would be much appreciated.

Thanks in advance.

Mine is the same. I'm no expert (clearly) but I'm not sure it'll make any difference on interest only as you're not paying off capital. Could be wrong though.

My last payment to Scarborough is on the 28th February. They say I can either "miss" March's payment and pay on the 1st April or make a payment on the 1st March. I don't think i'm "missing" anything in truth though, I'd only be paying 3-4 days later. You think they would have just moved February's payment to March 1st seeing as it's the next day, or maybe that would make too much sense.

dixie_dean_2

I think if you repay capital maybe it's better but on interest only worse, although i could well br wrong. As for the payment date, if you dont make your march payment, my understanding is that that amount is added to the loan and you pay interest on it. If you do make it you have to pay btwice in a few days and i dont see what benefit there is. Think I'm having a mental block.

andrewmp

dixie_dean wrote: »

I think if you repay capital maybe it's better but on interest only worse, although i could well br wrong. As for the payment date, if you dont make your march payment, my understanding is that that amount is added to the loan and you pay interest on it. If you do make it you have to pay btwice in a few days and i dont see what benefit there is. Think I'm having a mental block.

I reckon it's because we currently pay in arrears and we're moving to advance payments. As we're moving to advance payments we won't be any worse off that paying in arrears as we'll effectivley be staying in arrears by a month anyway (if that makes any sense). In other words, if we keep paying the same, our (very far away) end date will stay the same (or might change by 3-4 days).

dixie_dean_2

Anyone with anything more concrete?

inca_2

You'll basically be paying 11 months mortgage instead of 12 so the 12th month is added onto the mortgage (should you wish it to be). This will mean that you will pay interest on the extra payment that hasn't been taken over the rest of your mortgage.

The reason being is that Skipton take DDs on the 1st so if they didn't do this and you paid your mortgage on the 28th March (with Scarborough as this is the only date they offer) and then have to pay again on the 1st and your payday is as in my case the 28th you would effectively be paying 2 months mortgage from one pay packet. They are trying to avoid the problems that the change in date may cause for some people, it won't be an issue for everybody but they can't be seen to be disadvantaging people. This is their concession for the change in dates.