Calculating first mortgage payments

TheCyclingProgrammer

Our house purchase is progressing again (we are FTBers) and I'm just trying to make sure I fully understand when and how much our first few payments will be as there is some overlap with our rent payments and I want to budget accordingly.

Could somebody please confirm I've understood this right?

1. Our "preferred payment date" is the 1st of each month by DD
2. Our mortgage offer states that the first DD will be taken on the 15th following completion, thereafter on the first payment date

So, if for example, we completed on the 10th March:

* Our first payment would be on the 15th March for the period of 10 March - 31 March
* Our second payment would be on 1st April, for the period of April

If we complete after 15th March, say on the 20th, it would be:

* Our first payment on 15 April, for period of 20 March - 30 April
* Our second payment on 1 May for the period of May

Is this right? Or is the period to which payments relate completely separate to the preferred payment date?, i.e. if we completed on 10 March, it would be:

* Payment on 15 March for period 10 Mar - 9 April
* Payment on 1 April for period 10 April - 9 May, and so on...

amnblog

You need to speak to your lender to get the absolute clear figures. It is likely they won't be able to calculate 100% until they have the completion date.


The usual process is that the first payment consists of a normal monthly payment plus interest to cover the period from your date of completion to the end of that month.


As a result you can expect the initial payment to be higher than a usual payment.

TheCyclingProgrammer

amnblog wrote: »

You need to speak to your lender to get the absolute clear figures. It is likely they won't be able to calculate 100% until they have the completion date.

Yes, my broker wasn't able to give me an answer either. I don't need an exact figure but I'd like to be able to roughly budget enough.

TheCyclingProgrammer

I'm reading my offer again and it also says:

"The first amount collected for the advance will consist of a full monthly payment plus the interest for the first month of completion"

I guess what I'm trying to figure out is will I have a full monthly payment on the 1st immediately after the 15th?

Jhoney_2

Your payment on 15th is usually both of these payments if I remember rightly. Hence:-

"The first amount collected for the advance will consist of a full monthly payment plus the interest for the first month of completion"

So however many days of your completion month and the month thereafter. If you want to keep the payment down, try to complete nearer the months end e.g 27th = 4 days March interest and 1 full month.

It may be that you are advised to do the earlier part of the month instead but for the same reason. Do check which as for me that was nearly 10 years ago.

Madbags

Bear in mind it can take anything up to 14 days to set up a direct debit. So the date of your first payment may even change depending on your actual completion date if the DD isn't already set up with your bank.

Thrugelmir

Madbags wrote: »

Bear in mind it can take anything up to 14 days to set up a direct debit. So the date of your first payment may even change depending on your actual completion date if the DD isn't already set up with your bank.

Requirement is for 10 days notice of taking the funds for a direct debit.

getmore4less

Simplest thing to do is budget for double and overpay/save anything left if it less.

If things are tight and not hard against a LTV/borrowing limit just borrow a bit more

kingstreet

Clearing banks collect in arrears and building societies and former building societies collect in advance.

This will have a bearing on when the first payment is due.

As an example, if you complete on 15 March, your first payment to a lender like HSBC would be a full month, plus interest from 15 March to 31 March but it wouldn't be debited until 1 May.

A building society would calculate the payment the same way, but it would be on 1 April, not 1 May.

TheCyclingProgrammer

getmore4less wrote: »

Simplest thing to do is budget for double and overpay/save anything left if it less.

If things are tight and not hard against a LTV/borrowing limit just borrow a bit more

I can do that - things aren't tight, I just like to keep my budget as realistic as possible (I use the YNAB system and software).

TheCyclingProgrammer

kingstreet wrote: »

Clearing banks collect in arrears and building societies and former building societies collect in advance.

This will have a bearing on when the first payment is due.

As an example, if you complete on 15 March, your first payment to a lender like HSBC would be a full month, plus interest from 15 March to 31 March but it wouldn't be debited until 1 May.

A building society would calculate the payment the same way, but it would be on 1 April, not 1 May.

Thanks, that's useful. Our lender is Coventry building society. Maybe I will just give them a ring and find out.