Don’t Let Your First Mortgage Payment Be A Surprise: What to Expect

The category: Mortgage Payments

The tags: , , , ,

Congratulations, you’ve secured your new mortgage, and it’s time to embark on your homeownership journey! However, you might notice that your first monthly payment isn’t exactly what you expected it to be, and you may be wondering why. Let’s explore this common scenario and shed light on what’s happening behind the scenes when you complete on your new mortgage.

The Direct Debit Dilemma

More often than not, the first monthly payment on your new mortgage will be higher than the amount quoted on your Mortgage Offer. The reason behind this might seem puzzling at first, but it all comes down to how long it takes for your new lender to set up the new Direct Debit.

Your new mortgage lender won’t send the Direct Debit instruction to your bank until your new mortgage has officially completed. This step is crucial for them to ensure they have all the necessary details in place. The hitch here is that it can take a few weeks for your bank to set up the new Direct Debit, which means your first payment might not be taken until you enter your second month as a homeowner.

A Month Without a Payment – But Not Without Interest

Yes, you read that correctly. You could actually go a whole month without making a mortgage payment. It’s important to note that this isn’t a case of receiving free money. When your mortgage lender does take their first payment, it will also include any interest that has accrued between the date of completion and your first payment date. This interest is a reflection of the time it took for the Direct Debit setup to finalize.

Back to Normal in Month 3

Don’t fret; your monthly payments should return to the amount that was originally stated on your Mortgage Offer in month 3 of your mortgage. The exact amounts can vary depending on the day of the month you complete your mortgage and the date of your first mortgage payment.

To keep you informed and provide clarity, your lender will reach out to you shortly after your mortgage completes. They will confirm the exact amounts of your first and subsequent payments, as well as when these payments will be debited from your account.

In essence, the initial discrepancy in your first mortgage payment is due to the administrative processes involved in setting up your Direct Debit. It’s a temporary adjustment, and your payments will normalize in just a couple of months.

So, rest assured, while your first mortgage payment may be a bit of a surprise, it’s simply a matter of timing and interest accrual. Your lender will ensure that you have all the information you need to manage your mortgage payments smoothly from month three onwards. If you have any questions or concerns, don’t hesitate to reach out to your lender or a mortgage expert for guidance. Happy homeownership!