What date to start a mortgage ?

jackieblue

A friend has advised that it's best to complete as close as possible to the end of the month, otherwise we would have to pay extra for the part month. Not really sure what this means and why it would be.

Can anybody offer any suggestions as to why this might be the case.

Many thanks.

MarkyMarkD

Some (very few) lenders charge a whole month's interest in the month of redemption, so if you have the mortgage for an exact number of years (matching an incentive period, say) you would lose out if it started at the beginning of a month.

But that's very few lenders, so not a big deal.

With other lenders, the incentive period lasts until the end of the calendar month following the anniversary - e.g. start discount on 2 July, end on 31 July 2 years later. So starting as early as possible in the month (except on the 1st) is the best as you get a longer discount.

With fixed rate products with a fixed end date (e.g. "2 years ending 31 August 2008") it's obviously best to start them as soon as possible, for the same reason as above - you get longer on the cheap rate.

With all of my points above, you will have a high first month payment if you complete on (say) the 2nd of the previous month, but you normally won't pay it until the next month so it's not so bad.

E.g. complete 2nd July, first payment 1st August of just under 2 months' interest. Whereas leaving it until 31st July, first payment 1st August (if they sort it that quickly) of just over 1 month's interest. But if you are paying interest elsewhere it all comes out in the wash.