Moving direct debit from 15th of month to 1st

yogiberr

hiya,

I pay my mortgage on the 15th of the month.Would I pay it off a lot quicker if i simply moved the direct debit to the 1st of the month?

I wonder if there's a program out there that I could use to find out?

many thanks,

yogi:
https://www.therainforestsite.com

UK007BullDog

No. You pay your mortgage once a month if the 1st or the 15th makes no difference.

The only way is by paying in extra amounts of money every month "overpaying". But check if your mortgage allows it and how much without being penelised.

MarkyMarkD

What you say isn't quite true, UK007.

If the mortgage has interest calculated on the month start balance, then it makes no difference at all and it's best to pay on the LAST day of the month.

If the mortgage has interest calculated on the daily average balance, then you will save a marginal amount of interest by paying earlier in the month. But then again, you'll lose almost the same amount of interest you could have earned by putting that money somewhere else for the intervening period.

UK007BullDog

I would disagree. Anyway the month has 30/31 (28) days one way or another so it makes no difference, the OP still has to pay interest from the 1st to the next 1st. Or the 15th to the next 15th. It really does not matter.

If the OP wants to really repay the mortgage early then overpayments and offsetting are the way to go (if it fits his lifestyle and finances).

The daily / monthly / yearly rates do play a role in overpayments. It would be better to be on a daily interest rate as the overpayments will reduce the overall amount where interest is charged on. On yearly rates the interest is calculated at the end of the year and any overpayments then added on later to calculate the next years interest. Every lender has their own way of calculation so will not be able to say how they do it exactly. but as a rule of thumb, if you want to regularly overpay get a daily interest rate calculated mortgage.

MarkyMarkD

Your first point is incorrect. Interest is calculated and added to the mortgage monthly in almost all cases. If the payment is made earlier in the month, the average daily balance is lower and the interest will be marginally less.

Your points about daily interest being "better" is true, if the mortgage is a repayment one and the interest rate is the same as another one which is not on daily interest. But it isn't the big deal that it is made out to be in the press. And the OP is asking the impact of changing the payment date on their existing mortgage, not which sort of interest calculation basis will benefit them the most.

yogiberr

hiya,

I am an a nationwide repayment daily interest mortgage ...

So, surely if:
1) my mortgage is £500 per month,
2) I pay on 1st as opposed to 15th...

...then surely for 14 days I am paying interest on (mortgage oustanding -£500), as opposed to paying interest on (mortgage oustanding )??

I am on a 2 year fixed rate of 4.59. I understand all about overpayments, and the fact that if I pay my mortgage earlier in the month, then it won't be earning interest elsewhere.

However, I see the early payment as the equivalent of "earning" 4.59 % (tax-free) on my money.

Any confirmation appreciated.

Many thanks,

yogi

lizzyb1812

Hi

Several years ago when I took out my mortgage I arranged for the monthly payments to be taken earlier in the month - not to save interest but to be sure there would always be cash in my account to pay the mortgage as I did not ever want to default on my mortgage for lack of cash later in the month.

Had a review of my mortgage a while ago and your point came up. The gist of the conversation was that paying earlier in the month had saved me a bit - but not much and certainly not enough to significantly reduce either the term or the balance.

So the answer, in my experience, is yes it will save you a bit. But don't expect anything dramatic

lizzyb

MarkyMarkD

Yogi - your post is absolutely correct.

But, Lizzy, your post is absolutely correct too.

If your mortgage has daily calculated interest you'll save a bit by paying earlier in the month, but not a lot.

yogiberr

righto,

I thought as much.I'll try and do it sooner rather than later.I just want the monkey off my back.

ta folks,

yogi