Does repayment date affect interest charged?

N

nest egg

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Current situation, mortgage repayment and interest charge occur around the same point in the month. If I were to move the repayment later in the month (say +2 weeks), the bank informed me that the date the interest is charged would not be altered.

Given interest is levied daily, I'm wondering if I would end up paying a slightly higher amount in interest every month as a result? By my reckoning, the balance owed would be higher for two weeks each month than it would have otherwise been, had I kept the repayment as it was.

Thoughts on this?
 
The date the interest is posted to your account is not relevant.

Interest is charged on the balance outstanding every day. The sooner you make a repayment, the lower the balance will be, and so the less interest will be charged.

Let's say you are due to make a monthly repayment of €1,000 on 1st of the month, and you do not pay it until 15th month.

You will be charged additional interest as follows:
€1,000 @3.5% = €35 per year
€35/12 = €3 per month
€3/2 = €1.50 for half a month.

If you do it 12 times a year, the annual cost will be €18.

Brendan
 
It's unlikely the bank would allow you to change your payment date from the 1st of the month to the 15th of the month without making two payments in one month as otherwise your loan would be considered to be in arrears.

If for example you last paid on 1st May the bank would not allow you to delay making June's payment until 15th June as it would be considered as late. What is likely to happen is that they would take a payment on 1st June, another payment on 15th June and then 15th July after that.

That was what happened with the vast majority of my direct debits when I requested to change the payment date due to my payday changing.
 
hfp said:
It's unlikely the bank would allow you to change your payment date from the 1st of the month to the 15th of the month without making two payments in one month as otherwise your loan would be considered to be in arrears.

If for example you last paid on 1st May the bank would not allow you to delay making June's payment until 15th June as it would be considered as late. What is likely to happen is that they would take a payment on 1st June, another payment on 15th June and then 15th July after that.

That was what happened with the vast majority of my direct debits when I requested to change the payment date due to my payday changing.
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Yes that's correct, and that's not an issue per se, providing you had enough to cover two payments within a couple of weeks. The key issue for me was that the date the interest charge hit the account wouldn't change in tandem with the repayment date, which means a higher balance owed for two weeks every month, and a higher interest charge as a result.
 
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