Find out when you can expect to make your first mortgage payment.
When you take out a mortgage, you agree to pay back the loan with monthly payments, the amount of which is detailed on your monthly mortgage statement. Your mortgage payments are generally due on the first of each month, but most lenders will give you a grace period to complete your payment before you start incurring late fees.
But when is your first mortgage payment due?
Unlike rent payments, you don’t make your first mortgage payment in advance of owning the home. Rather, your first mortgage payment is made one month after the last day of the month you closed on the home. That means if you closed on the 20th of October, your first payment would be on the 1st of December — one month after the last day of the closing month.
But there are a few things to be aware of — such as when you close — that can affect how much you pay in closing costs.
When you close on your home, you sign a bunch of forms and pay closing costs, which include everything from attorney fees to appraisal fees to homeowners insurance and private mortgage insurance. You basically pay for everything except the loan itself.
That’s because mortgages are paid in arrears, which refer to a payment that is made at the end of a given period. Since the interest portion of your mortgage payment is based on the remaining principal balance, your lender can’t accurately calculate your monthly interest amount until after the month has ended.
If you closed on a home in October, your first mortgage payment on December 1st would be for the month of November.
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At closing, your lender will generally have you pay prepaid interest for the remaining days of the month you closed. That means if you close at the end of the month, you’ll have less prepaid interest to pay then if you close at the beginning of the month.
Your prepaid interest is the daily interest accrued multiplied by the number of days left in the month after your closing date. (Your daily interest accrued is the loan amount multiplied by the initial interest rate and divided by 365). Consider a $300,000 mortgage with a 4.5% interest rate:
Daily interest accrued: ($300,000 x 0.045) / 365 = $36.99 per day
If you closed on the 20th of October, you’d prepay 11 days of interest which would come out to $406.89 (11 x $36.99). If you closed on the 29th of the month, you’d pay $73.98.
If you want to pay less prepaid interest at closing, try and close at the end of the month.
However, you may find closing at the beginning of the month gives you more time to gather funds for your first mortgage payment. If you closed on October 5, for example, you’d have almost two months before your first mortgage payment was due.
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Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.
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