Changing Payment Date

Darwood

I phoned my Mortgage lender (HSBC) today to change the date of my direct debit from 1st to 15th of each month to try and even out my payments as I get paid weekly. The assistant on the phone said there would be a slight additional charge next month to cover the interest for the period from 1st to 15th. Fair enough I thought; £10-20 maybe. Turns out to be over £200! Ouch. That's quite a hit. Does that sound right? My monthly payment is normally £562.

Niksan

I guess it depends on how much of that £562 is paying off interest, £200 would suggest you're currently paying £400 a month interest, but there may be charges in that figure for the change.

CloudCuckooLand

Half of £562 is £281. Or they may have pro rata'd the days. 28 days in February. 562/28 = £20. 15 days is £300.

Did you think the "half-month" would be free..?

Whether "over £200" is exactly right, depends on the remaining term of your repayment mortgage, the total amount involved etc.

Interest forms the bulk of payments in the early years of a mortgage, less towards the end.

Presumably you are not changing a 23-year old arrangement at this last stage...so I would lean towards interest being the bulk of the monthly mortgage payment...

If in doubt ask for the calculation.

getmore4less

ASk if as long as the total paid in the month adds upto the payment due will that be ok?

Then you could pay weekly.

Why not build up a months spend buffer then it won't matter.

Darwood

Thanks for all the replies.
I wasn't expecting the half month for free but I was trying to figure out if I am going to have to try and find an extra £200 out of my pocket next month. If my regular payment is around £500pm and I'm going to pay £700 next month then in my mind instead of paying £1000 for 2 months I am paying £1200 for the same period. Having spent some time with pencil and paper now I think it still works out around £125pw which is what matters so I can put that aside in preparation for the extra payment.
I still don't know whether I'm being charged more over the lifetime of the mortgage or whether it's just the timings that have changed. I suspect the former.
Thank you for all yoru comments.

TrickyDicky101

You didn't answer what your remaining term is but if you are at the start (first 3 years for example) of a 25 year mortgage then £200 for a 15 day extension looks fairly reasonable (given current mortgage payment and lack of pertinent information such as current rate/whether it's a repayment or interest-only mortgage). This will be a one-off addition, so your payment next month should revert to your £562 pm payable on the 15th now.

Yorkie1

Darwood wrote: »

If my regular payment is around £500pm and I'm going to pay £700 next month then in my mind instead of paying £1000 for 2 months I am paying £1200 for the same period.

I still don't know whether I'm being charged more over the lifetime of the mortgage or whether it's just the timings that have changed. I suspect the former.

It's the latter. You will pay less on your very final payment as there will be less than a month left at that point. Interest is calculated daily, so (in my simplistic understanding of it), they add up however many days there have been since the last payment date to the current one. Instead of 2 x 30 days for the first adjusted payment and the last one, you'll pay 1 x 45 days and 1 x 15 days.

Darwood

TrickyDicky101 wrote: »

You didn't answer what your remaining term is but if you are at the start (first 3 years for example) of a 25 year mortgage then £200 for a 15 day extension looks fairly reasonable (given current mortgage payment and lack of pertinent information such as current rate/whether it's a repayment or interest-only mortgage). This will be a one-off addition, so your payment next month should revert to your £562 pm payable on the 15th now.

Thank you for your help. To answer your question I am 2.5 years through a 30 year mortgage. I am halfway through a 5 year fixed rate of 5.73%.

TrickyDicky101

Yorkie1 wrote: »

It's the latter. You will pay less on your very final payment as there will be less than a month left at that point. Interest is calculated daily, so (in my simplistic understanding of it), they add up however many days there have been since the last payment date to the current one. Instead of 2 x 30 days for the first adjusted payment and the last one, you'll pay 1 x 45 days and 1 x 15 days.

I'm afraid I do not believe this to bet the case: the OP has effectively extended his mortgage by 15 days. The additional payment he has suffered this month is the additional interest expense he has incurred by extending the mortgage at this point in the mortgage's term. The final repayment will remain at £562.

Thrugelmir

TrickyDicky101 wrote: »

I'm afraid I do not believe this to bet the case: the OP has effectively extended his mortgage by 15 days. The additional payment he has suffered this month is the additional interest expense he has incurred by extending the mortgage at this point in the mortgage's term. The final repayment will remain at £562.

Possibly slightly higher than £562 for ongoing payments. As payment will be made 15 days after the interest calculation is made. Normally the interest will be calculated on (for example) the 31st of the month. Payment being made on the 1st. By deferring payment to the the 15th. Interest charged on the outstanding balance from the 1st to 14th will compound on the previous months closing balance.

Darwood

I expect you (TrickyDicky101) are probably right.
Hypothetical question: If I had asked them to bring my payment date forward by 14 days do you think they would have reduced my next payment?