Higher payment for the first month

maveli

Dan_Collins,
Are you saing that my payment will star only from the month of March ? ie I will not be making any payment in Feb.

Thanks

MickHG

Hi,
I also phoned Nationwide, and it appears, although they don’t seem to know why, this initial extra Payment is (as stated previously) the first months interest in advance, but I was told that if you so choose you can pay your installments at the end on the month, thereby essentially eliminating this problem.
Which ever way you do it makes very little difference to the APR

MarkyMarkD

Indeed. If you are on a monthly interest mortgage, there's no point paying earlier than the last day of the month.

But if your mortgage is daily interest (as I believe it is with Nationwide) paying at the end of each month will mean your entire mortgage is paid a month later and cost you a whole extra month's interest over the term.

At the end of the day, if you haven't got the money, it's still the best thing to do.

ccygirl

The way I understand it and I know that some providers are different. The mortgage interest is calculated on a daily basis and charged at the end of the month. If you pay at the begining of the month the your oustanding balance is reduced and less interest will accrue because of this although it will still be charged to your account at the end of the month.

You will not be in arrears if you pay at the end of the month. If you pay at the end of the month you will pay off any interest charged that month and make any capital repayment.

Dan_Collins_2

maveli wrote: »

Dan_Collins,
Are you saing that my payment will star only from the month of March ? ie I will not be making any payment in Feb.

Thanks

Each lender is a little different but yes. BUT!!! always a but, you are not being let off the month you pay for Feb and Mar on the 1st of March. In theory you should have money from Feb to make this payment. If you complete at the end of them of the month the payment may be a little less as the 1st DD will be set up quicker. However this will not affect the apr or the interest you will pay in the long run. You pay for it as long as you owe it.

Also by paying you monthly payment at the end of the month will not save anything against paying at the begining. I would not worry, worry more about making the payment date suit you and your salary etc.

Dan_Collins_2

ccygirl wrote: »

The way I understand it and I know that some providers are different. The mortgage interest is calculated on a daily basis and charged at the end of the month. If you pay at the begining of the month the your oustanding balance is reduced and less interest will accrue because of this although it will still be charged to your account at the end of the month.

You will not be in arrears if you pay at the end of the month. If you pay at the end of the month you will pay off any interest charged that month and make any capital repayment.

Regarding the arrears, if you complete on the 1st of feb(Remember that you cant always chose a completion date) your first payment will be made in Mar. If you make 1 payment in March of the normal amount then you will have paid nothing for Feb. Lenders only charge interest in this month as they understand its tough when you move.

Repayments are calculated to clear the loan at a rate within a set period, say 25 years. In theory the monthly payment can be made at the start or the end as long as it is made in each month. I cant see how this would save much money by paying earlier, but I would agree if you were to make overpayments each month.

Sooler

MickHG wrote: »

Hi,
I also phoned Nationwide, and it appears, although they don’t seem to know why, this initial extra Payment is (as stated previously) the first months interest in advance,

why don't they know? are they not mortgage experts?

maveli

Thanks Very much for the replies.

Sooler wrote: »

why don't they know? are they not mortgage experts?

I too called them and not all the call centre staff know how they arrived at this figure and what this is for. After talking to couple of them the closest satisfactory answer I got is that this is only a ballpark figure and applies only if the mortgage starts in the middle of the month. If they transfer the mone on 31st then I don't have to pay this. However they can't guarantee that they can set a day for the transfer.

Sooler

Dan_Collins wrote: »

Regarding the arrears, if you complete on the 1st of feb(Remember that you cant always chose a completion date)

The OP has said completion is 31st January

Dan_Collins wrote: »

your first payment will be made in Mar. If you make 1 payment in March of the normal amount then you will have paid nothing for Feb. Lenders only charge interest in this month as they understand its tough when you move.

Is it not the case that lenders only charge interest as you describe because that is the period covered by intitial interest - it is not part of the mortgage - as the mortgage starts the first month after completion.

Complete 31st Jan - mortgage begins the following month - February (1st of 300 monthly payments if it's a 25 year term)

Any interest charged for January is 'initial interest' - interest charged for the amount you've borrowed for however many days you had the money in January.

Sooler

maveli wrote: »

I too called them and not all the call centre staff know how they arrived at this figure and what this is for. After talking to couple of them the closest satisfactory answer I got is that this is only a ballpark figure and applies only if the mortgage starts in the middle of the month.

Unbelievable! - they're supposed to be one of the country's biggest mortgage lenders.
You'd think they'd be able to put you through to someone who knows the products.
Try an in branch mortgage advisor perhaps.