Your first mortgage payment: when will it be and how much will it cost?

One of the most common questions I get after a mortgage completes is: when will my first mortgage payment come out?

Closely followed by: why is it more than I expected?

The good news is that in most cases, everything is exactly as it should be. Your first mortgage payment just works a little differently to the payments that follow.

If you've just bought a property

Once your purchase completes, your new mortgage officially starts and interest begins to be charged.

Your lender will normally write to you shortly after completion confirming:

• The date of your first payment

• How much they will collect

• The date your normal monthly payment will be taken going forward

Your first payment will usually be higher than the monthly repayment shown on your mortgage offer. This is because it includes your normal monthly payment plus interest for the period between completion and your regular payment cycle starting.

For example, imagine your normal mortgage payment is £1,000 per month.

If you complete on 28th September, your first payment might be taken in early November. It could be around £1,100, made up of your normal £1,000 for October, plus a few days' interest for the end of September.

Alternatively, if you complete on 5th September, the first payment might still be taken in early November, but could be closer to £1,800, as there is almost a full extra month's interest to account for.

These are deliberately simplified examples. Every lender has its own payment dates and way of calculating the first collection, so don't rely on these figures for budgeting. Your lender will confirm the actual amount and collection date directly with you.

After that first payment, things should settle down and your normal monthly repayment will be collected each month.

What happens when you remortgage?

A remortgage can look slightly more confusing because you have an old mortgage ending at the same time as a new one starting.

Before completion, your solicitor will obtain a 'redemption statement' from your existing lender. This confirms how much is required to repay your old mortgage on a particular date.

However, mortgage payments don't stop automatically just because a remortgage is about to end, and to complete everything on time the redemption statement is likely to be at least a few weeks before your existing mortgage is fully repaid.

For example, your solicitor might obtain a redemption figure of £200,000 ready for your remortgage to complete on the 10th. If your usual £1,000 mortgage payment is then collected on the 5th, your old lender has effectively received money that wasn't reflected in the original redemption statement.

Your solicitor may obtain an updated figure, but depending on timing the lender may simply receive slightly more than was actually required to clear the mortgage. Any surplus isn't lost. Your previous lender will normally automatically refund this to you after the mortgage has been closed.

For this reason, I wouldn't normally recommend cancelling your existing mortgage Direct Debit yourself while the remortgage is going through. It's better to let the lenders and solicitor deal with the final figures.

And what about the first payment on my new mortgage?

Your new mortgage works in much the same way as it would with a purchase.

Interest starts from the day the new mortgage completes and your new lender will write to you confirming the amount and date of your first payment.

Again, that first payment may be higher than the regular monthly repayment shown on your mortgage offer because it can include additional interest from the completion date.

Once the first payment has been made, your normal monthly mortgage payments should then begin.

The important bit

If you've just completed and the payment dates or amounts don't look quite how you expected, don't panic and don't cancel any Direct Debits without checking first.

With a purchase, wait for the letter from your new lender confirming your first collection.

With a remortgage, you may briefly see payments involving both your old and new lender.

Your old lender will reconcile the account after redemption and return any surplus due to you, while your new lender will confirm its first payment separately before taking any money.

And, as always, if I've arranged your mortgage and something doesn't look right, just get in touch and I'll happily check it with you.