basic mortgage question

maveli

Could anyone please explain why one need to pay more repayment in the first month after you take mortgage. ie if I take mortgage in April the first month's payment is significantly higher compared to second month ? and where is this extra payment going ?

Thanks
Maveli

ohmsoft

Hi

Your mortgage payments are normally paid in advance so if your mortgage completes say on 15 May in June you will need to pay all of Junes payment plus the interest from 15 May to 31 May.

The offical term of the mortgage would then start 1 June - so the payment ensures the balance does not increase by this point

HTH

apk1

This is called "accrued interest" , if you take an extreme case of completing on the 1st of May, your first payment will be due in June, and will comprise of the interest due from 1st - 31st May + a normal months interest for June so effectively a double payment. July's payment will then be a normal payment as it will relate for interest for 1st -31st of July.

Basically its down to the lender getting your monthly payment organised, as by the time the solicitor has confirmed completion has taken place it would probably be too late to set up your direct debit.

The payment is simply "catching up" on interest missed, as in the above example you would have been in the property for the whole of May but you would not have paid anything.