Mortgage interest from completion to payment date.

chaskins

Hi,

I have hopfully a simple question

We are moving house and the estate agent called to ask if a completion date of the 8th June was acceptable. I wanted to know if we have to pay extra interest on the mortgage between the 8th June and the 2nd July, which will be the payment date. Is it better to try to complete closer to the payment date?

Regards,

Chris

robnye

what is the 2nd date - 2nd July?

normally you start owing interest on a mortgage from the date the funds are released to your solicitors - so that will be the completion date, regardless of the date you actually move in (assuming it is after the completion date)
if you cant/wont/dont want to move in until the 2nd july, then yes you will have to pay the extra interest
if you have a reasonn for not moving in on 8th june, then dont agree to the completion date

Richard_Webster

Aren't there two separate points?

1. If you complete on 8th June then you will have to pay interest on the mortgage from 8th June.

2. However there may be an issue about when you pay this interest.

Each lender is different about how they collect the payments so OP would need to check with his particular lender. However, say the payments are made in arrears and exactly one month after completion. If you complete on 30th June then first payment of 30th July and it will be one month plus a day or two of the previous month. If you get paid on 25th July it can come out of the salary that's just been paid in to your bank

However if you complete on 2nd July then first payment on 2nd August which will be nearly two months (30 days of July plus all of August) but still paid out of the salary paid in on 25th July.

I am not saying this is how it will work for OP, but it demonstrates that the relationship between when someone is paid and the amount and timing of their first mortgage payment can be significant. If clients ask me what to do I point out that it can make a difference but tell them to check with their lender as they are all different. For instance Nat West use dto offer a choice of 7th or 22nd of the month for regular payments and the Woolwich used to always collect payments on 16th. This has probably changed now.

Wickedkitten

chaskins wrote: »

Hi,

I have hopfully a simple question

We are moving house and the estate agent called to ask if a completion date of the 8th June was acceptable. I wanted to know if we have to pay extra interest on the mortgage between the 8th June and the 2nd July, which will be the payment date. Is it better to try to complete closer to the payment date?

Regards,

Chris

I don't know which lender you are with but we are with Nationwide, completed the 18th of march and got charged interest for the month of completion so our first mortgage payment is about £240 more than normal.

mberry77

Yes you will have to pay interest, otherwise you will have a free mortgage! and im sure the lender isnt going to offer you a freebie. your first payment is just going to be higher ie a month and a bit

Yes you could more in nearer the 2nd to have a lower payment, but then you would have to pay more rent/mortgage on your current property. so it will swing in roundabouts.

Debt_Free_Chick

Interest is almost certainly calculated daily, so it doesn't matter when you pay or when you complete.

subjecttocontract

I think the important point is that your mortgage payments are likely to be required in advance so, on 2nd July you will have to pay :-
* 1 months mortgage payments AND
* 25 days interest (8th June - 2nd July inclusive)

sunnysea83

I completed on 10th October, my first mortgage payment came out on 9th Nov for the period 10/10 to 9/11 and thats how it seems to work for my bank, although on my last mortgage on my previous property on the first payment i paid from completion date to first payment date and then first payment date to next payment date.