Best mortgage completion date?

Amy56

Hi, I am in the process of remortgaging and I need to let the solicitor know my preferred completion date.

I was going to opt for 1st April, as I understand that I would then have a month free of paying a mortgage payment (old lender last payment on 1st March/new lender then not due until 1st May). Firstly, am I correct in this?

Secondly, the solicitors letter mentions that it might be beneficial in some cases to complete at the month end for mortgages where monthly interest is charged to avoid paying extra interest. (I have no clue whether my existing mortgage has monthly calculated interest - I'm with the Chelsea if that helps!!***) But if I do this, then presumably I will be due to pay my new lender (HSBC) a payment in April?

There is no problem with making an April payment, other than the fact that I had liked the idea of having a mortgage free month and using it towards a little break over Easter!!;)

So really, my question is - does it matter when I complete particularly?? Am I really going to be saving much if I complete at the month end rather than the first of the month?

Many thanks for any advice:)

*** Edited to add - according to the Chelsea website, their mortgage interest is calculated on a daily basis. So I guess that means it doesn't matter when I complete??

kingstreet

When the interest is calculated isn't the issue here.

What's important is if the payments are made in advance, or in arrears.

Your current Chelsea mortgage has been paid in advance, so the payment you make on 1 March is for the month of March. Any settlement figure provided to your solicitor will reflect this. Consider cancelling your direct debit in the third week of March to ensure another payment isn't made for this mortgage on 1 April.

If you are borrowing from another building society, or former building society, chances are your payments will be made in advance once again. Completing on 1 April may mean a first payment on, or around 15 April, with your first regular payment then being made on 1 May.

If your new mortgage is with a clearing bank, your payments will normally be made in arrears. A completion date of 1 April would then mean a first regular payment on 1 May, as you surmised.

Borrowers complete at the month end to avoid what's known as accrued interest. This is the interest required for the number of days between completion and the end of the month in which completion takes place.

If you complete on 15th, you'd then have a first payment which included 16 days interest (for March for example) on top of the normal monthly payment. The settlement figure for your current mortgage would be lower, as a result, so the figures all balance out in the end.

You need to ask your new lender if it collects in advance, or in arrears to ensure you aren't caught out. Payment dates and amounts will be confirmed to you in writing just after completion.

Amy56

thanks ever so much for your reply - you have helped me on another recent question I had and both times your answers have been really thorough and I really do appreciate it.

many thanks:)

kingstreet

I thought the case sounded familiar.

So the lender is HSBC.

Last thread on this (IIRC) suggested a borrower would have both accrued interest to pay from 17 June to 30 June and a full month's payment but these wouldn't be debited until 1 August, as there was less than 28 days to the month end.

https://forums.moneysavingexpert.com/discussion/comment/44304620#Comment_44304620

Looking at Stavros' post, your completion on 1 April could mean an accrued interest payment of 29 days and a first regular payment both going out on 1 May.

Unfortunately, only your lender can answer this with any degree of accuracy.

Amy56

thats great thank you!:) I had tried to do a search but didn't find that thread - so thanks so much for taking the time to reply again:)

getmore4less

It will not cost more or less overall, it is just a cash flow issue.

If this may cause an issue borrow a bit more(about one payment) if not hitting a LTV limit and once the dust settles overpay if you did not need it.

This way it does not matter when it happens.

Amy56

getmore4less wrote: »

It will not cost more or less overall, it is just a cash flow issue.

If this may cause an issue borrow a bit more(about one payment) if not hitting a LTV limit and once the dust settles overpay if you did not need it.

This way it does not matter when it happens.

Thanks for your post:) We are totally fine with making the payments, so no cash flow issue - With needing to give the solicitor a completion date, I was just weighing up my options and came around to thinking about the possibility of having a payment-free month and it was appealing for a moment!!;)

Amy56

Incase its helpful for anyone else....

I have today phoned HSBC and they have confirmed (as per the link to the old thread posted above) that if we complete our mortgage with them on 1st April, our first monthly payment will be due on 1st May and will be a full payment for May and the interest only portion for the month of April.

So it won't quite be two monthly payments, but i'm not sure how much it will actually be until I complete.:)