How is my mortgage interest calculated?
We use three methods of calculating and charging interest. You may have a combination of different methods depending on the terms of your mortgage.
Daily Interest Scheme
Interest is charged to the mortgage account on the first of each month, based on the number of days in the coming month and the balance outstanding (including unpaid interest) on the last day of the previous month. Interest is also charged (as mentioned below) on debits (sums added) to your mortgage account during the month. When you make your regular monthly payment, or any additional amount is paid into your account, we will adjust the interest charged based on the payment amount and the number of days remaining in the month (including the day on which the payment is credited). For example if your payment is received on 20 January, 12 days’ interest credit will be given.
Annual Interest Scheme
Interest is charged to the mortgage account on 1 January each year based on the amount you owed (including unpaid interest) on the 31 December of the previous year. Interest is also charged, as mentioned below, on debits (sums added) to your mortgage account during the year.
We will not adjust the interest charged to reflect any payments into the account during the year, except for any additional payment(s) treated as a capital repayment (please see 'Can I pay extra towards my mortgage ' for details).
Half-Yearly Interest Scheme
Interest is charged to the mortgage account on 1 January and 1 July based on the amount you owed on 31 December and 30 June respectively, with interest on debits in the period as mentioned below.
Interest charged on debits (sums added) to your mortgage account
All advances, including a new mortgage advance, additional borrowing, stage advances or retention releases will incur interest from the day they are debited to the account. For more information on when fees added to your loan will incur interest, download our fees and charges.
If there is a change to the interest rate on your mortgage we will recalculate the interest charged at the time the interest rate changes, regardless of the interest scheme which applies to your mortgage.
Please note that on redemption (full repayment) of your mortgage, interest will be charged to the date of repayment. Special arrangements apply to interest-only flexible drawdown mortgages and lifetime mortgages. If you would like more information on these types of mortgages please call us.