Daily Interest Mortgages explained - Apply for a Daily Interest Rate Mortgage

When it comes to Daily Interest Mortgages, interest is charged on a regular daily basis. If the interest is calculated once every year this is described as Annual Rest, alternatively if the interest is calculated every day it’s known as Daily Interest.

The interest that you are charged on a daily basis is dependent on your mortgage balance from the previous years. That is, the interest that you will owe in the second year of your mortgage will be based on the remaining balance from the end of the first year.

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Annual Rest Interest

How it works is that your rate of interest increases every day and your HYPERLINK "https://www.propertyadviceblog.com/discount-mortgages"mortgage lender divides the annual interest by 365. The amount which you owe the lender can vary depending on the amount of interest accrued every day of the year. The amount you pay your mortgage lender will cover the annual interest figure, unless you have a repayment mortgage where you will also have to pay a percentage of the mortgage loan.

What are the advantages of Daily Interest Mortgages?

Interest is calculated on each day’s outstanding balance for a daily interest mortgage, therefore as your balance decreases, so too will the interest charged. This means that you are only ever paying interest on what you actually owe. On an annual interest mortgage the money you repay in January is not taken into account until the following year – therefore throughout the year you are actually paying interest on money you no longer owe. Because interest is calculated daily in a daily interest mortgage, you save money.

What are the disadvantages of Daily Interest Mortgages?

If you keep up to date with repayments then a Daily Interest Mortgage could save you money. However if you fail to make a monthly payment and your mortgage balance grows you will immediately have to pay a greater rate of interest.

Do all lenders have Daily Interest Home Loans available?

Most lenders do sell daily interest mortgages but often do not tell existing customers that they are available. Customers can be locked into their current mortgage deal unless they have a flexible mortgage or their current mortgage lender may not offer a Daily Interest loan, in which case borrowers could save money by researching the market and calculating if they could save from changing their mortgage provider and changing to a Daily Interest Mortgage.

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