Part interest payment for 1 day

ccmccm

I recently bought a house with a mortgage with Woolwich and completed 31st July.

I have received a letter informing me of my first payment:

Account Summary

Amount of borrowing released: £302,706.00
Borrowing amount released on: 31 July 2014

Your first payment details

If your mortgage funds were released to you before the end of a month, your first payment may include a part interest payment to cover this period which is shown below in the "Total first payment due" section.

Regular monthly payment: £1,357.60
Part interest payment for July: £926.15
Total first payment due on 1 September 2014: £2,283.79
Regular monthly payment to be collected on the 1st of each month: £1,357.60

This doesn't seem right - I was expecting a larger first payment but if I pay on the 1st of the month, am I paying for a whole month's interest just because they insisted I complete on the 31st? Surely that should only be a day.

ACG

Woolwich would not insist on you completing on any day.

Check your product with woolwich. Some of their products charge interest daily, some annually. Which is yours?

The DD needs about a week to set up. So if your payment is the first of the money, the DD needs to be set up at the latest around the 23rd of the month before. Yours wont be.

snowscreamer

We had the same with the Woolwich, we completed on 28th March and our first payment was 1st May.

There is actually not just 1 day but 32 days between your completion and your first payment. Interest is calculated daily therefore you are accumulating interest from the day of completion. This is calculated for the 32 days and then charged together with your regular monthly mortgage payment (interest + capital) for September. After that the interest is included in your regular payment. It just covers the interest accrued for your first 32 days

ccmccm

Ah ok that makes sense. I think I was confused as I assumed payment 1 September was for Capital + Interest 01/08 - 31/08. Add to that the partial interest specifically mentioned July I was confused as there was technically only 1 day in July since we completed.

Thanks for the help.

snowscreamer

I should add that all regular payments are upfront for the coming month, so that's why it seems slightly top-loaded.

kingstreet

Worth bearing in mind, the clock starts ticking on the day your solicitor draws down the funds, not completion day.

If he gets the money a day or two before, you'll have interest to pay for those days too.