Mortgage Completion Dates??? Intial Payment?

jbg_1981

Hi, just trying to sort out our mortgage completion date and have spoke to our mortgage lenders but they baffle us with numbers.

Basically were looking to complete on a day where we pay as little as pos. Im of the understanding and for example... if we completed towards the end of october (say the 26th), 14 days later we'll pay the interest of those days in october, plus novembers mortgage payment.

But if we completed on the 1st of nov, 14 days later we'll pay the interest which works out basically £20 cheaper than our monthly mortgage charge, then on the 1st dec we'll pay the normal monthly mortgage payments.

Is this correct?

Look forward to your advices!

dunstonh

It depends on your lender.

Most lenders have you paying in advance although some do arrears. Some have fixed payment dates in the month, others do not.

Whatever way it is done you dont save or lose money as interest accrues daily. If you complete on the house 14 days earlier then you pay 14 days interest. If you complete 14 days after that you will not pay for those 14 days.

With many lenders, if you completed on the 1st of November you would either see an interim payment of a day or two less than the normal month or you would see a double payment on 1st December (1st Nov to 31st Dec).

Sooler

Why would it be 14 days after the 26th?
How is 1st November 14 days later than the 26th October?

What type of mortgage is it?

jbg_1981

This is our first mortgage and its with halifax, a 2 year fixed term mortgage. We've been told that with the first initial payment that this will be paid 14 days after the completion date and we cant decide on what date to complete the mortgage on. We've provisionally said we would like to complete on the 1st of november and then 14 days later we think from what weve been told we have to pay £557.88, then on the 1st december we pay our normal mortgage payment which is £587.56. But if this is the case where is novembers mortgage payment?

But then we've also been told if we were to complete say 26th october, 14days later we'll have the interest payment of £128, then novembers mortgage payment of £587.56 so a total initial payment of £715.56.

Is this right?

dunstonh

My initial comment is why are you choosing a 2 year fixed? Thats not very efficient when you look at the costs of arranging fixed rates and there is still upward pressures on inflation which could see you coming off the fixed rate at a time when buying a new one would cost a lot more and give you a higher rate.

We've been told that with the first initial payment that this will be paid 14 days after the completion date and we cant decide on what date to complete the mortgage on. We've provisionally said we would like to complete on the 1st of november and then 14 days later we think from what weve been told we have to pay £557.88, then on the 1st december we pay our normal mortgage payment which is £587.56. But if this is the case where is novembers mortgage payment?

They have to give you notice before they can take the first direct debit. That is the 14 days. The first payment is novembers payment.

But then we've also been told if we were to complete say 26th october, 14days later we'll have the interest payment of £128, then novembers mortgage payment of £587.56 so a total initial payment of £715.56.

That is correct. You are borrowing the money a week earlier and that is an extra week's interest.

Its not costing you any more because you pay for every day you borrow the money. When the mortgage finishes, it would finish a week earlier if you completed on the 26th. Its still exactly the same period you are borrowing the money for.

jbg_1981

Unfortunately we are very new to all this and thought that a 2 year fixed term would give us the option at the end to either have another fixed term, try a variable or possibly remortgage to get a % cash back, reduce the amount borrowed and therefore reduce the monthly payments. Would you recommend taking a longer fixed term then?

And regarding my questions on the completion dates, for us wanting to pay less on the initial payment so we can spend more on decorating the house for when we move in, completing on the 1st nov is the better option as we would be paying £557.88 instead of £715.56.

dunstonh

I would go with a longer fix. Fixed mortgage charges are going up all the time and remortgaging every 2 years is going to cost a fortune in fees. With a 5 year you know exactly where you are for the next 5 years and only pay fees every 5 years and not every 2.

Sooler

I am no expert but is it not the case that the mortgage payments commence the month after completion.



If you complete 1st Nov you pay £557.88 interest for the period 1st-30th of November with your mortgage payments beginning on 1st Dec of £587.56 for 24 months (2 years) - or whatever term you go for.

If you complete on 26th October you pay £128 interest for the period 26th-31st of October with your mortgage payments beginning on 1st Nov of £587.56 for 24 months (2 years) - or whatever term you go for.


There is no mortgage payment in the month you complete – it is just interest for the number of days that you have the money. So you’re better of completing 26th October, or as near as you can to the end of any month.

Sooler

Although completion can be on any date you wish, I believe it’s traditional for completions to be on the last Friday of the month as people then have the weekend to move out/in (hence 26th October).
The last Friday also reduces the initial interest charge to a few days as your mortgage then begins the following month.

Completion on Friday 30th Nov would mean only 1 days initial interest to pay with the mortgage payments starting 1st Dec - but allows for no slippage on the completion date.

26th Oct allows you to the 31st Oct to complete in case there were any hold ups at the last minute.

If the completion date slips over into the beginning of the month then you'd pay a whole months (however many days you have the money for) initial interest before your mortgage payments begin the month after completion.


I reiterate - I am no expert.

jbg_1981

Sooler wrote: »

I am no expert but is it not the case that the mortgage payments commence the month after completion.



If you complete 1st Nov you pay £557.88 interest for the period 1st-30th of November with your mortgage payments beginning on 1st Dec of £587.56 for 24 months (2 years) - or whatever term you go for.

If you complete on 26th October you pay £128 interest for the period 26th-31st of October with your mortgage payments beginning on 1st Nov of £587.56 for 24 months (2 years) - or whatever term you go for.


There is no mortgage payment in the month you complete – it is just interest for the number of days that you have the money. So you’re better of completing 26th October, or as near as you can to the end of any month.

But if i completed on the 26th october, id have the interest to pay for october plus novembers mortgage totalling £715.56 as the initial payment. But if i complete on 1st november, i'll have £557.88 to pay as an initial payment, then december is £587.56 the normal monthly mortgage charge... i think!?

Sooler

jbg_1981 wrote: »

But if i completed on the 26th october, id have the interest to pay for october plus novembers mortgage totalling £715.56 as the initial payment.

Yes, your mortgage begins November (24 payments x £587.56) + £128 interest for October

jbg_1981 wrote: »

But if i complete on 1st november, i'll have £557.88 to pay as an initial payment, then december is £587.56 the normal monthly mortgage charge... i think!?

Yes, your mortgage begins December (24 payments x £587.56) + £557.88 interest for November. Note: the mortgage begins a month later.


Don't just look at the initial payment - look at the total payment.


You can pay (24 x £587.56) plus either £128 or £557.88






Ask for a copy of the Terms and Conditions, do you have a copy, there ought be be a section on interest and your first payment.
What does it say?


Similar to this - but this is Halifax Ireland
http://www.halifax.ie/index.jsp?1nID=94&2nID=104&pID=170&nID=199
3. Interest
3.1 You will pay interest to us on the amount of Loan outstanding from the date on which the funds are released. When the Loan is drawn, we will request from you an initial interest payment to cover the period from the date the Loan is drawn to the last day of that calendar month. Thereafter, monthly interest payments/repayment installments will be collected at monthly intervals, commencing on the date specified on your mortgage application form. The monthly interest payable is calculated on the first of the month on the outstanding balance at the end of the previous month and debited to the account on the last day of the calendar month.