Daily Interest

Jonah01

Hi,

I am just about to start a nationwide mortgage. Completion should be on the 1st June.

My first question is. Will Nationwide take the first payment on this date or will i just have to pay a double payment on the 1st July. Either way it doesn't really matter i suppose.

Secondly. With daily interest.

For example

a mortage of £100,000 at 5% would have a monthly interest only payment of £416. You make these payments up front. So the 1st June payment will pay the interest incurred for the month of June. If i then make an overpayment of £500 on the 2nd June this would then mean i have paid too much initially. Does the extra paid just get taken off the capital at the end of the month. So in effect the overpayment would be £500 plus the extra interest paid.

I hope this makes sense to someone.

Any help would be appreciated.

Thanks

Paul

homer_j_3

Daily interest means that the lender will look at your balance each day and calculate the interest based on that balance.

So, if you paid more in one day, the following day your interest would be based on the balance following your overpayment.

Jonah01

Thanks. What i am trying to understand is.

e.g.

1st June payment of £416. Interest only.
2nd June overpayment of £500.

This means for June the interest only payment should be
1 day at 5% of 100,000 / 365
then the rest of the month at 5% of 99,500 / 365

This would equal less than £416.

What happens to the difference? Does it come off the capital?

Thanks

Paul

homer_j_3

your interest would be recalculated on 2nd june and you should be given 2 choices, decrease your monthly payment and keep your term the same or keep monthly payment the same and reduce the term.

CLAPTON

as I understand it.

the mortgage is paid monthly in arrears so you will make your first payment approximately a month after completion.

Nationwide work out the interest on a daily basis so when you make a payment, the balance (the capital) is reduced with effect from the next day and you then are only charged interest on the reduced balance.

If you overpay, this has the effect of reducing the period of your loan although later you can opt for lower payments and maintaining the original term.

Madjock

Nationwide do not take payments in arrears, your first payment will be about 3 weeks after you complete and will also have initial interest added.

CLAPTON

Madjock wrote: »

Nationwide do not take payments in arrears, your first payment will be about 3 weeks after you complete and will also have initial interest added.

three weeks after completion is three weeks in arrears.