Mortgage payment date...

danielle21_2

Hi guys

Just a quick one!! - im wondering if my house purchase completes on 28th July as planned & I arrange for the mortgage payments to come out on 27th or 28th of the month - when will I pay my first payment July or August???!

Also, the mortgage advisor told us to let the mortgage come out early in the month so we wont get charged as much interest - is this also true?

Thanks

B&H

If your mortgage charges interest daily, the sooner you pay it less interest will be incurred. Not sure about the answer to your first question.

Debt_Free_Chick

danielle21 wrote:

Hi guys

Just a quick one!! - im wondering if my house purchase completes on 28th July as planned & I arrange for the mortgage payments to come out on 27th or 28th of the month - when will I pay my first payment July or August???!

Best to check with the lender, but they wouldn't normally "get sorted" that quickly. First, they will be focused on getting the money to your solicitor on the 28th. I would then imagine that your file goes to another department, so they can set up the direct debit to collect the first payment. They would normally write and confirm when they take the first payment, how much that is and then when subsequent payments are taken and what the amounts are. They might simply take two payments at the end of August, so don't - whatever you do - spend the first instalment :eek:

Also, the mortgage advisor told us to let the mortgage come out early in the month so we wont get charged as much interest - is this also true?

Thanks

Again it depends on the lender. However, the majority charge interest daily, up to the day on which the payment is received by them. So it would make no difference, as what you gain at the beginning of the term, you lose at the end - as the term of the mortgage is the same, whenever you pay (unless you pay it all off early!). Here's an example .... your mortgage runs for 25 years from 28.7.2006 i.e. until 28.7.2031. You decide to pay on the 2nd day of each month. On 2.8.2006, you will be charged interest from 28 July to 2 August 2006. Then on 2 September, the interest for one whole month. This continues until the last month of the term.

In July 2031, you will make a payment on 2 July but the term runs until 28 July ... so on that date, you will need to pay the interest from 2 to 28 July 2031. Swings & roundabouts!

Some lenders charge interest based on the date payment is due - but these are a minority. It's best to check what the lender does - it should be in your mortgage offer details or simply call them up.

Regards

danielle21_2

Thanks thats helpful to know! Also, im 21 & got the mortgage over 40 yrs, reducing the term to 25 yrs after about5 yrs - good move or bad?

I have had mixed comments about the term, some friends/family say u pay a mortgage forever anyway - if u move house/upgrade etc & others say u should pay it off asap. The mortgage amount is our absolute maximum, leaving us with just enough to afford little luxury's! for now anyway until salaries rise...

courtjester

Each time I have started a new mortgage, it never quite seems to work out nice and neatly with you paying your first instalment exactly one month after completion as you might expect or hope for - for all sorts of reasons but essentially the timing of your funding issued by the mortgage company and the day you set your mortgage payment to be made.

Although it all works out in the long run, (whatever the period you will pay the same in total irrespective of when you start), it always seems to be that the first instalment is larger than the regular monthly payment, as generally you will be paying a whole month plus a part month depending on the completion date.

I would make sure you have funds for up to twice the amount you are expecting for the first instalment.

lostfarmer

Agree with the above- they have to give you 28 days notice of the first DD, and also they stick to your agreed payment date, therefore you will end up paying a month and a bit as first payment.. at least 28days after you move in.