Does what day of the month your mortgage starts affect your first payment?

Cantona_2

If so, why?

Miss_Penny_Pincher_2

Hi Cantona - I was just pondering this...

dpm_dpmartin argues that paying at the beginning of the month does make a difference and has just posted his own mortgage calculator on the mortgage free wannabe board here which calculates the potential interest saved:

http://forums.moneysavingexpert.com/showthread.html?p=2370105#post2370105

Miss_Penny_Pincher_2

Sorry just noticed you are asking specifically about the first payment! I don't know if it does. I completed on 31st March and made first payment on 28th April. I was very miffed that around £60 extra had been added as additional interest payments for the first month! I really couldn't understand it as surely I hadn't had the money any longer than I would in other months so why the extra interest charge??

dunstonh

You normally pay the mortgage in advance. Therefore you when you make your first mortgage payment you are paying for the month ahead and the days before upto that point.

AndrewSmith

Mortgage interest is calculated by the lender generally from 1st to the 30/31st of the month, usually paid in arrears, as they only charge you for the time you have had the money.

It does however vary from lender to lender, but is generally as above. Hence if you complete on the last day of a month you may find that your first payment also has an extra day's mortgage payment added.

Andy

Cantona_2

I'm due to complete on 7th July, and have asked for my mortgage payments to go out on the 17th of each month (a day after I get paid)... I wonder if my first mortgage payment will be on 17th July or 17th August?

If it's 17th July, am I right in thinking that my first payment will be slightly larger than the normal monthly payment to over the period 7th July to 17th August?

Or have I got it competely wrong??

AndrewSmith

It depends on the lender concerned, however I would guess that your first payment will be du Aug17th and will consist of one full month plus the period of 7th July - 17th July

Best way to find out is simply to ask your lender as they can tell you precisely.

Cantona_2

AndrewSmith wrote:

It depends on the lender concerned, however I would guess that your first payment will be du Aug17th and will consist of one full month plus the period of 7th July - 17th July

Best way to find out is simply to ask your lender as they can tell you precisely.

ok, thanks for your reply Andrew.

MarkyMarkD

I'm not sure I agree with Andrew.

More likely your first payment will be for the 7 week period from 7 July to 31 August, because you pay for the calendar month during the relevant calendar month - i.e. the payment on August 17 is for the month of August (plus the initial part month).

This is certainly how it works with A&L (my current lender).

Furthermore, I'm a bit concerned that dpm's otherwise excellent mortgage calculator makes some sweeping assumptions about the way the lender works out the interest, which may make it invalid for a large proportion of site users. I'm querying this with him on the other thread so I won't duplicate that discussion here other than to note my concern.

dunstonh

Mortgage interest is calculated by the lender generally from 1st to the 30/31st of the month, usually paid in arrears, as they only charge you for the time you have had the money.

Is this a new development? I know its been a few years since I transacted mortgages but back then you generally paid in advance.

So, if the mortgage payment was 1st monthly and you completed on the 25th, the first payment would be the month ahead along with another 6 days from 25th to 31st (assuming 31 days in the month).

MarkyMarkD

I think that dunston and I are both correct, at least regarding most lenders.