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

MarkyMarkD

Note that the thread to which Miss Penny Pincher refers has now been deleted, probably because it contained links to external downloads and signature links which breach the site rules.

PoorDave

Cantona wrote:

If so, why?

Probably because you got to choose you payment date, and it doesn't coincide with the day you got the money from the lender. Or maybe they chose the date (in each month) that you will pay, but again it does not coincide with your completion date.

It's bound to make them an extra few pennies each time, but over millions of mortgages that could be a sizeable sum

Miss_Penny_Pincher_2

MarkyMarkD wrote:

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.

What sweeping assumptions do you felt the calculator made? The amount seemed lower than what my mortgage lender says I owe but unfortunately the thread was deleted before I saw a reply from dpm on that.

Also regarding the best day to make the first payment do you think Cantona is best making it on the 17th? I'm still confused!

MarkyMarkD

As the other thread's now been deleted, I will have to repeat my comments from that thread here!

The calculator, as far as I can see, assumes that the mortgage has interest calculated on a daily basis. This is NOT universally true, by a very long chalk, and this means that its calculations are invalid for mortgages with monthly or annual interest calculations.

If your mortgage is daily rest, you want to make every payment as early as possible - not any specific day of the month, but just as soon as you have the money.

If your mortgage is monthly rest, you want to make every payment as LATE as possible in the month - as the interest bearing balance won't change until the end of the month in any case. This is why my (monthly interest) mortgage is paid on the last day of each month.

If your mortgage is annual rest, you want to make every payment as LATE as possible in the year. But in practice, you'll have to make a monthly payment - but that wants to be the last day of each month. And any overpayments should be saved up elsewhere and then paid off the mortgage on the last day of the year (and NOTE that the "year" might not be the calendar year), UNLESS your lender allows you to make lump sum payments (say >£500, typically) which reset the interest bearing balance: this is commonly the case, but I guess not universally (and the amount certainly varies).