Can someone explain how interest is worked out?

ceramic_2

Hi

I am new to mortgages and just got my first last year. I pay monthly but was told if I paid weekly or fortnightly it would get paid quicker because of the way they calculate the interest. Is this true? Can someone explain? If this is the case could I just ring the halifax and just have the way i pay changed?

Thanks for any advice in advance.

Ceri

maninthestreet

You might find this useful:

http://www.jeacle.ie/mortgage/uk/

Tiddler_2

ceramic wrote: »

Hi

I am new to mortgages and just got my first last year. I pay monthly but was told if I paid weekly or fortnightly it would get paid quicker because of the way they calculate the interest. Is this true? Can someone explain? If this is the case could I just ring the halifax and just have the way i pay changed?

Thanks for any advice in advance.

Ceri

Hi Ceri,

It all depends on the day on which you make your monthly payment.

If you pay on the 1st of each month, paying weekly would actually mean you pay more interest (if you pay the same amount in total as your monthly payment).

However, if your payments were, for example, £500 p.m. and you decided to pay £125 per week then you would over pay during the year to the tune of £500. The equivalent of over paying by £41.67 pm. You would be better to overpay this amount on the 1st of each month.

Also Halifax only offer the facility to collect 1 direct debit per month, and so if you wanted to pay weekly you would have to pay by standing order.

I have tried to explain how daily interest is calculated on this thread.

http://forums.moneysavingexpert.com/showthread.html?t=878549

Hope that helps

Dan_Collins_2

Most mortgages you pay in advance and not in arrears so I imagine you would have to pay your monthly payment then pay extra each week to make that theory work.

If you paid weekly I would agree Tiddler.

posh*spice

This is a really helpful post - thank you.:money::D