Annual or Daily Interest?

BoBoDobie

Our current mortgage ends soon and I am going onto another fixed rate scheme for 2 years with our current provider. I'm just doing the paper work and there is a form in there for us to sign headed 'Transfer from Annual to Daily Interest Rate'.

Is this a good thing? Not sure if to sign and send it back or not? I don't remember the advisor mentioning it when we spoke on the phone?

Comyface

Yes, it's a good thing.

With Annual Interest they look at your debt once a year, and the amount you owe at that point is the amount they charge you interest on for the rest of the year.

With Daily Interest they look at your debt every day and charge you interest on what you actually owe, as it's going down each time you make a payment (assuming you have a repayment mortgage). So you get charged less interest.

The only time it works against you (as far as I know) is if you fall behind with your payments. You're then charged interest on any fees straight away, and also interest on your interest.

Doesn't make as much difference with an interest-only mortgage but I'd still do it. Any overpayments, however small, will decrease what you owe straight away and you're charged less interest from the following day.

BoBoDobie

Ahh I see. Thank you for explaining that!!