Mortgages in the UK are typically paid in arrears. This means that the borrower makes payments to the lender after the mortgage payment is due.
For example, if a borrower has a monthly mortgage payment due on the 1st of each month, they would make the payment on or before the 1st of the following month. In this case, the borrower is paying for the use of the mortgage funds in the prior month, hence the term "in arrears".
This is different from other forms of credit, such as credit cards or personal loans, which are often paid in advance. With these types of credit, the borrower makes payments before the credit is used.
Mortgages in arrears are the most common form of payment in the UK, lenders offer a wide variety of mortgage products that can have different terms, such as the frequency of payments (e.g. weekly, fortnightly or monthly) and the length of the term (e.g. 25 years).
It's worth noting that there are some mortgages where payments are made in advance. These are known as offset mortgages, where the borrower's savings are held in an account linked to their mortgage, and the savings are used to offset the interest on the mortgage, so the borrower effectively repays the mortgage in advance, although those types of mortgages are less common.
When applying for a mortgage, it's important to understand the terms of the loan and how the payments will be made. Borrowers should also consider how the payment schedule and interest rate will affect their overall financial situation and ability to repay the loan.
In summary, in the UK, the most common form of mortgage payments are made in arrears, meaning that payments are made after the due date of the mortgage, but there are other options, such as offset mortgages, which allows payments to be made in advance. It's important for borrowers to understand the terms of the loan and how the payments will be made before applying for a mortgage.
If you would like to talk over this subject or any other with us, please feel free to get in touch windsor@legacy-finance.co.uk