First mortgage payement - inital interest help

Evian

I wonder if anyone can help.

We completed on our house purchase on the 19th of August. Our direct debit date for payments is the 19th of every following month. This means our first payment is being taken on 19th september, of the full amount as expected.

I've also been told that I need to pay the initial interest dating from the day the funds were released (19th August) to the end of the month. This fee equates to £170.

What I dont understand is that surely the interest for the 19th August to the end of the month is covered in my first months payment. Why do I have to seemingly pay for this period of interest twice?

I though inital interest was only payable when completion dates and direct debit dates differed. e.g. Completing on the 6th August, first payment taken on 19th September. So intial interest would cover 6th to 19th August.

Any help appreciated.

Evian

anyone?

Senior_Paper_Monitor

In the simplest of terms some lenders charge in advance, some in arrears, some refer to complete calendar months etc.

The first payment(s) will be used to bring the situation into line with the relevant policy.

For this reason we always cross check with the individual lender (or lenders if a remortgage situation) when setting completion dates so the borrowers knows exactly what impact there will be on their first payment(s) and when these will take place (same with insurance policies). This can be quite complicated as it varies with the DD date and the actual completion date and their relationship to each other.

maninthestreet

Evian,

It's quite possible that the payment made on the 19th of each month covers interest from the 1st of the month to the last day of the month, i.e part in arrears, part in advance. Therefore, you will have additional interest to pay from the 19th August to the 31st August.

Evian

Thanks guys. It just took me as a suprise; I dont remember reading anything about it in the previous correspondance.

cabbage

In addition some solicitors request the mortgage funds a day or so early so that completion goes smoothly. You pay interest from the day its released by the lender to the solicitor. All the posts above explain why you have to pay the sum of interest from the day the funds were released to the lender to the end of that calendar month. From 19th September you will be paying the interest for September, again on 19th October you will be paying the interest for Oct. This extra payment is just the interest pro rata for August.