Why is my first mortgage payment higher?
Excellent news, you now have either completed on your new mortgage or you are very close too. Now is the time to start making your monthly payments.
The exact date on the first payment will depend on each individual lender, but this normally falls within the first month after completion. Most lenders will send you a letter or text you the date of your first payment and the amount they will collect.
But have you ever wondered why the first payment on your mortgage is higher than the following payments? In the article we give you a little bit more of an insight as to why this is.
What to Expect from Your First Mortgage Payment
If it is really a concern and you wish to know when your first mortgage payment will be, lenders give you several options to check this sooner rather than later.
You can:
- Call the mortgage lenders directly and speak to them
- Login to their online banking app portal through your desktop or app
- Wait for them to issue you some documentation
Mortgage paperwork supplied by a lender or mortgage broker will clearly outline your expected monthly mortgage payments. It can be alarming when your first mortgage payment comes in higher than the figure declared in your illustration document provided by the mortgage provider.
In fact, for many, this higher payment can cause panic because you may believe that something has gone wrong with your mortgage. This is completely normal with your mortgage deal and this is the same with all types of mortgages, first time buyer mortgages, remortgages and buy to let.
Why Is My First Mortgage Payment Higher Than the Rest?
When you’re reviewing your mortgage illustration or mortgage offer, you might notice that your first payment looks higher than subsequent payments sometimes double, this can look scary. Don’t worry this is completely normal and here’s why.
At this stage, your exact mortgage completion date isn’t known yet, so the lender uses an estimated date to show how your first payment might look. For example, they might assume funds are released on the 15th of the month. Your first payment will then cover the period from that date up to the end of the following month, which could be around six weeks in total.
This means your first payment isn’t just for one month, it’s for a bit longer, which is why it appears higher. After that, your payments will settle into a regular monthly amount.
First mortgage payments can be higher than your ongoing monthly payment. This is because it’ll include interest from the date the lender released the funds, up to the end of that month, plus your payment for the following month.
For example: If they were release the funds on the 12 February, your first mortgage payment in March will include interest for 12 to 31 February, as well as your mortgage payment for March.
How Each Lender Handles Your First Payment
Here’s a breakdown of what to expect from each lender when it comes to your first mortgage payment:
Accord
You’ll receive a letter within 3 working days of completion confirming the exact date and amount of your first payment.
Barclays
Your first payment will be taken on the 16th of the month after you complete. Future payments will be on your chosen date.
Coventry
They won’t collect anything until the month after completion. They’ll send a letter confirming your first payment date and the amount.
Halifax & Lloyds banking Group
No payment is collected until the month following completion. If you complete within 4 working days of your preferred payment date, your first payment may be taken on the 10th of that month. Then it switches to your regular chosen date.
HSBC
They won’t collect any payment within 28 days of your mortgage starting. You’ll receive a letter confirming your first payment date and amount.
Nationwide
Expect a letter within 5–7 working days after completion with your first payment date and amount.
Natwest
You’ll get a welcome letter after completion confirming your first payment date. You can change the date by contacting their mortgage team.
Santander
They’ll send you all the details after completion, including when your first payment is due and how much it will be.
TSB
No payment will be taken until the month after completion. The first payment might not fall on your preferred date, but they’ll let you know ahead of time if that’s the case.
Do I Cancel My Direct Debit if initial Payment is High?
No, definitely not. Cancelling a mortgage direct debit will ring big alarm bells to your lender and they may contact you to find out:
- Why you cancelled the direct debit
- If the mortgage is unaffordable
- Apply fees or penalties if subsequent payments are late or you default on the mortgage
Missing a mortgage payment, regardless of the reason, can result in a late payment or default on your credit record, which can affect future mortgage applications, you should avoid this at all costs. Also, this would of been put in your initial mortgage agreement, along with any other costs like your early repayment charges.
If you cancel a mortgage direct debit and fail to maintain your mortgage payments, it could ultimately lead to repossession. Therefore, it’s crucial to keep your direct debit active once your mortgage completes.
If you’re genuinely struggling with the first high payment, do not cancel the direct debit. Instead, contact your mortgage lender to discuss your situation. They will likely be more understanding if you proactively reach out rather than waiting for them to contact you about missed payments.
Can I delay my higher first payment?
Yes but I would not recommend it. You can change your direct debit to be taken at a time which comes extend the amount of time before it is taken. But to be honest, it should have been agreed an explained to you from the outset, so you should be prepared for it.
So once you have paid your mortgage deposit and receive your assumed completion date, you should make sure the money is in your account. It is down to you to manage this.
Frequently Asked Questions
Can I reduce my mortgage term?
Yes, most lenders allow you to make overpayments or increase your monthly payments, which can help reduce the length of your mortgage. However, overpayment rules vary between lenders – and some charge early repayment fees. Always check your mortgage agreement or speak to us before making any changes.
Can we help you on your mortgage journey?
Every lender handles first payments a little differently, so if you’re unsure about anything, just ask. Our team of expert advisers at Alexander Southwell Mortgage Services are here to guide you every step of the way. And the best part? Our advice is often fee-free. Your mortgage adviser will talk you through all of the above and more, like, mortgage rates, contact details for the banks, property advice, remortgage advice and we allow all of our customers to make the best well informed decisions.
