1st mortgage payment rip-off

Idontbelieveit_3

Dear all

I have made a grievous error in judgment and taken out a mortgage through Direct Line.
After an application process, which did not go smoothly, I accepted the mortgage offer and received the funds on the 16th November.

I noticed that Direct line have debited me for a complete months interest on 1st December for my first payment.

Outrageous!! I have paid a months interest for 15 days of mortgage. :mad:

I was expecting either to pay for the period from the 16th Nov to the 1st Dec, on the 1st December, or for the same period plus Decembers interest on 1st Jan.

I have called direct line 3 times. Each advisor stated that they simply divide the years interest into 12 and direct debit you on the 1st of each month.

I think this is wrong, and have raised a complaint with the company, prior to calling the Financial Ombudsman on Monday morning.

Direct line also claims to calculate interest on a daily basis. How can they do this if they charge interest in advance?

The following is an extract from Direct Lines T&Cs.

We will notify you of any adjustment(s) we make to one or more Monthly
Payments which is necessary because the period between the completion date of
your Mortgage (which is the date of drawdown of the Mortgage) and the date
when your first Monthly Payment was due was not an exact calendar month.


Am I being unreasonable or are Direct Line as shoddy as I think they are?

How should the 1st repayment work?
All of my previous mortgages have charged the 1st interest payment for the part of the 1st month plus a full second month at the end of the second month.

toonfish

I think you are being unreasonable - you will pay the same at the end of the day.

Jockthearab

Hi there,

Perhaps they haven't communicated correctly but from what you say I think you've got off lightly!! As far as I'm aware you pay 'in advance' so I believe on the 1st Dec you should have been charged for Nov & Dec interest.

Sorry that it's not what you want to hear BUT look on the bright side... you may have paid less than you really should have,which is a bonus at this time of year

dunstonh

Direct Line documentation is fine and does point out that you pay in advance.

Am I being unreasonable or are Direct Line as shoddy as I think they are?

You are being unreasonable

All of my previous mortgages have charged the 1st interest payment for the part of the 1st month plus a full second month at the end of the second month.

There is no standard way of doing it. Some do it in arrears, some in advance. With my C&G mortgage, they are in advance and with the first payment you pay the month ahead and the number of days from the advance was made (15 in your case). So, had you been with them, your first payment would have been 45 days worth.

I have called direct line 3 times. Each advisor stated that they simply divide the years interest into 12 and direct debit you on the 1st of each month.

I think this is wrong, and have raised a complaint with the company, prior to calling the Financial Ombudsman on Monday morning.

I dont believe Direct Line give advice and therefore you cannot complain about advice given. The FOS will not uphold a complaint on this basis. You have gone direct and therefore you take responsibility for the role that the adviser would have done. You need to complain about yourself

Direct Line will respond factually to questions asked and will mention the compliance requirements but most of that is issued in writing for you to read before you sign the contracts.

Idontbelieveit_3

Thanks,
I hadn’t appreciated there were different ways of doing this.

If you pay interest in advance, it could make the first payment very expensive.
Should that show up in a higher AER comparison, or is the only way of knowing to read the T&Cs very carefully for each mortgage you are comparing?

I should have done a little more research before hand.

I don’t think I will pursue this with the Ombudsmen after all.



Thanks again for your comments.

Rick62

A lot of lenders will charge for the month in advance, in which case you would have had to pay one and a half months interest. So long as the interest is calculated daily then you have not lost out and the advance element of your payment will effectively reduce the interest that you pay.

It can impact on your cashflow however, so anyone taking a new mortgage should check how their lender does it and make sure they have fully allowed for whatever the first payment will be.

ohmsoft

I have actually once seen a similar case where I had to painstakenly provide breakdowns to show that if you are on daily interest and pay exactly one month in arrears (ie on the first day of the next month) you negate any benifet of paying by daily interest - any later in the month and you start to loose out because of DI.

I think it would be more unfair to insist payments are made in arrears.