When is your first mortgage payment due?

• Your first mortgage payment is due the first day of the first full month after closing.
• You have 15 days to get your payment in before it’s late.
• Your mortgage payment covers interest accrued the previous month.

You can choose a closing date to minimize closing costs or to extend the period before your first payment is due.

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When Is the First Mortgage Payment Due?

Mortgage Closing Date Affects Your Cash Flow

If you schedule your home closing for late in the month, you’ll have to bring less money to the closing table. For example, if you close in August, your first mortgage payment is due October 1. Your closing costs will include interest for August, however.

So if you close on August 29, you’ll owe just two days’ interest at closing. But if you close on the 2nd, you’ll pay 29 days’ interest. The difference could easily come to hundreds of dollars.

On the flip side, if you close on August 2nd, you won’t have to worry about a mortgage payment for nearly two months.

In the long term, neither strategy changes the amount you ultimately pay. However, the different options can make a difference to your cash flow. For instance, if you’re getting a big rent deposit back after closing, you might want to minimize your closing costs now because you’ll have that money by the time your mortgage is due.

This Month’s Payment Covers Last Month’s Interest

When you close on your home purchase, the escrow officer or attorney collects prepaid interest. But that does not apply to ordinary monthly payments.

Your mortgage lender normally collects its mortgage interest in arrears. That means your payment covers the interest accrued in the previous month. Once the interest has been collected, the rest of your monthly payment goes toward reducing your balance. That’s a process called “amortization.”

Do You Skip a Mortgage Payment When You Refinance?

Some lenders actually advertise the chance to skip a mortgage payment when you refinance. But that’s not what’s really happening. When you refinance, your new lender gets a mortgage payoff from the old lender. That payoff includes mortgage interest up to the day you close.

So, if you close your refinance on August 29th, your payoff includes interest up to August 29th. Your prepaid interest for the new loan is just two days’ worth, and your first payment is due on October 1. So you don’t make a payment in September, which might seem like you skipped it. But in reality, your closing costs on August 29th included an amount covering most of your September payment.

If you’re really in a bind and want to miss a mortgage payment plus not pay out-of-pocket closing costs, you have a couple of options:

1. Ask the lender for a credit to cover closing costs. Understand that the credit is not free. In order to cover those costs, your lender will charge a higher interest rate. That rate and higher payment will apply for the entire term of your loan.
2. Wrap your closing costs into your refinance. This also costs you because you pay interest on those extra amounts added to your loan balance.

Be Careful About Scheduling First Mortgage Payment

Many people like to schedule their closing as late in the month as they can to minimize out-of-pocket closing costs. Borrowers should avoid closing on Fridays, however, especially before holiday weekends.

Friday closings are famous for errors and problems. And if your loan documents have to be re-drawn or your final documents don’t make it to the county clerk on time, you could experience a world of problems. Your rate lock might expire, for example – or all of your things could be in a moving truck in the driveway but you don’t yet have a house into which you can move your things.

Don’t cut it too close.

Get a custom mortgage quote now.