First Payment Question

bloodofareptile

We are FTBs and are in the process of arranging the mortgage, etc.

It's all going fine and dandy, but we're slightly confused. On our KFI sheets, they all say that the first payment to them is the first month + 1 month's interest.

I don't understand how this works - surely it should depend on when you get the money vs your first payment, as opposed to just a flat 1 month of interest?

Can someone explain?

Thanks in advance!

Yorkie1

A KFI is just an illustration and is probably giving you the worst case scenario.

If you complete on say the 20th of the month, and your payment date is say the 5th of the month, then on the 5th after completion you will pay for that complete month plus the dates from the previous month i.e. from the 20th. Unless your mortgage has some really weird T&Cs, that is.

I would ask your broker or lender to explain if you are not sure.

bloodofareptile

Thanks - we will ask on Monday but if only occurred to me rather late on a Friday night!

What you've said is what I would expect, really, but I didn't know if the mortgage market had some sort of random oddity!

Thanks!

TrickyDicky101

This requirement comes about due to the usual practice of mortgages being quoted on a repayments in advance basis - what this means is that you get advanced your mortgage money on day 1 and your first repayment is also due to the bank on day 1 (if on a repayment in arrears basis, then first repayment would be due 1 month after the bank has advanced your mortgage money). If, therefore, you take out the mortgage on a day which isn't a repayment date, you then have to pay the accrued interest from the mortgage advance date to the first payment date. This is what happened to me 5 years ago, and my first payment was almost twice the normal monthly repayment (which came as a nasty surprise and led me to understand why this had happened as at the time I thought the bank was taking the micky).