What will happen on the day my mortgage changes hands.?

ferry

My mortgage changes hands on 1st June-Can anyone please clarify what will happen to the payments.

Will my current lender take out their payment for 1st June then credit it back with my new lender taking their 1st payment meaning that I will need to allow for 2 payments to go through?
Or does my existing lender not take the 1st June payment?

How does it work?
Thanks
F

betmunch

It would depend on your current and future lender.

If you are paying your current lender in arrears but the new lender wants paying in advance then you could have two payments in the same month.

If you are paying your current lender in advance and your new lender takes payments in arrears then you will have a moth where you dont need to pay!

Check with the mortgage broker that sorted out the new mortgage for you for the new lenders terms and check your paperwork/call the current lender for their terms.

Cheers

Scaredy_Cat_3

Is 1st of the month your normal payment date? And you are switching mortgage companies on 1st June, not 31st May?

Assuming the answers to those questions is yes... your new lender will get a redemption statement from your old lender to tell them how much to pay to clear your mortgage on 1st June.

Since the redemption statement will be issued a few days before 1st June, it will not take into account the payment due on 1st June. It will include all the interest and fees up to that date - but will only take account of payments received at the time the statement is issued. So, assuming the mortgage is paid off on 1st June you will not need to make the payment to your old lender, as all interest applied up to 1st June will have been covered in the redemption figure.

If the new lender is late with the payment, you will have to pay a bit extra in interest. If they are significantly later in clearing your mortgage then you may need to pay the monthly payment so that it doesn't look like you missed a payment (but then you would get a refund of part of that since your monthly payment covers a whole month).

If you are fairly confident the mortgage will change hands on 1st June, you can cancel the direct debit to your old lender to stop the June payment going out. If it does go through, you will get a refund, but this could take some time, and I just think it's easier to cancel it before it goes.

Does that make sense?