setting up mortgage payment date?

STAR_BUCK

Hi

We've got to let our lender know what date of the month we would like mortgage payments to be direct debited out of our account. Is it cheaper to have payment come out at the beginning of the month ( therefore incurring less interest?).

Cara79

I think this only applies if interest is calculated daily, therefore you'd want to pay on the 1st of the month.

My mortgage (unbelievably) is charged annually (not sure how that works!) so I pay on the end of the month, so I can gain a bit of interest from the banks before paying my mortgage off.

I guess it would be best to check how / when your interest is calculated.

Cx

MarkyMarkD

Cara

"Annual interest" means that the year's interest is calculated based on the balance at the start of the year, and then divided by 12 to give the monthly interest charge.

If you have a repayment mortgage, this is SLIGHTLY more expensive than "monthly interest" which is in turn (and only if you don't pay on the last day of the month) SLIGHTLY more expensive than "daily interest".

If you have an interest only mortgage, it is irrelevant which basis interest is calculated on.

So, if you are on a repayment and annual or monthly, you want to pay on the last day of the month. If you are on a repayment and daily, you want to pay on the first day of the month * that you can afford it * which probably means pay-day for most people.

tonydee

I never knew this so something I've learnt today. Can I ask if it's possible to change the payment date after it has been set ?

Thanks

Cara79

MarkyMarkD wrote:

Cara

"Annual interest" means that the year's interest is calculated based on the balance at the start of the year, and then divided by 12 to give the monthly interest charge.

If you have a repayment mortgage, this is SLIGHTLY more expensive than "monthly interest" which is in turn (and only if you don't pay on the last day of the month) SLIGHTLY more expensive than "daily interest".

If you have an interest only mortgage, it is irrelevant which basis interest is calculated on.

So, if you are on a repayment and annual or monthly, you want to pay on the last day of the month. If you are on a repayment and daily, you want to pay on the first day of the month * that you can afford it * which probably means pay-day for most people.

Gosh, thanks for letting me know. Damn, it would work out a bit more expensive wouldn't it?! I pay on the last working day of the month, so at least that's a bonus.

When I remortgage, I'll look into this more now that I understand more about mortgages!

Cara79

tonydee wrote:

I never knew this so something I've learnt today. Can I ask if it's possible to change the payment date after it has been set ?

Thanks

It is indeed possible to change. I used to pay on something like the 25th, but have changed it to the last working day of the month.

All you need to do is phone your mortgage company and they will send out a direct debit mandate. You need to complete this with the new date and send it back. You should receive written confirmation of when the next payment will be. Until you receive confirmation, make sure you have the money available at the previous date in case the direct debit mandate doesn't go through in time.

MarkyMarkD

Cara

If you are paying by direct debit (which in most cases you will be, nowadays) there's no need for a new mandate to change payment date. The lender will just ask for the money on a different date.

You only need to complete a new form if you are paying by standing order - but then, you could do the same thing by amending your existing standing order using online banking or similar.

I personally think paying a mortgage by anything other than DD is daft as the amount can change any number of times in a year and being in arrears is a very bad idea.

Robert_Sterling

Am I right in thinking that a monthly DD has to be set up for a date on or before the 28th of the month ... probably to do with some months not having a 29th 30th or 31st.

MarkyMarkD

Indeed, you are not right, RS1. Most unusual!

My mortgage DD is set up for the last day of the month.

My 30 September mortgage payment was collected on 2 October.

I don't know whether it will be credited to my mortgage account during September, but I jolly well hope so, as otherwise it will stuff me up (as I am on a monthly rest mortgage). My September mortgage statement will doubtless either cheer me up or upset me somewhat.

I actually asked the bank to deduct my mortgage payment on the last working day of each month, so if they've delayed it by a month I shall not be happy. I even transferred money into my current account to meet the mortgage payment which was then not debited on Friday.

Worried

Sorry, i'm being thick... the interest on my mortgage is calculated monthly, so I should ask for my mortgage payments to be taken on the last working day of the month?

KTF

Mine comes out the day after payday (6th of the month).