When you’re buying a house, you have a lot to think about. You have to decide which loan is right for your situation. You need to determine how much house can you truly afford. Then, you have to find the right house and get the approval for your loan. There’s also the matter of prepping for closing and checking that you’re prepared for closing costs. Naturally, you’ll also need to see about moving into your new place and getting settled there. With so much going on, it’s easy to let this very important question slip to the back of your mind: When is my first mortgage payment due? However, you clearly need to know. In fact, you may want to take your first payment’s due date into account when agreeing to a closing date.
When Is My First Mortgage Payment Due?
Before you finalize your home purchase, you should ask this question: When is my first mortgage payment due? There are a couple of good reasons to do so. For starters, you want to know the due date so that you can pay on time in order to maintain or improve your credit score. In addition, the due date for your mortgage payment is tied to the date that you close. Understanding the relationship between them can help you make sure that you’re financially ready for both.
Your First Mortgage Payment
So, when is your first mortgage payment due? While it’s always important to verify the date with your lender, there’s a formula that you can generally use to predict the answer. As The Mortgage Reports explains, your first mortgage payment will be due around the beginning of the month after you’ve owned the home for a full 30 days. If you close on your purchase on February 3, your first payment won’t be due in March. It will be due at the start of April. What if you close on February 23? Count 30 days. Then, flip the calendar to the next month. Again, your first payment will likely come due at the start of April.
A Matter of Arrears
Why is there a delay? As The Balance indicates, it’s because of the way your mortgage payment is calculated. Remember that your mortgage payment goes toward paying off both the principal and the interest. Like rent, the principal is paid in advance for the next month, so you’re steadily reducing the balance on it. However, interest is charged on the amount of principal that is present during a set period of time, so the lender has to wait for that period of time to pass to see how much interest will actually accrue. That means the interest portion of your monthly mortgage payment is always paid in arrears, or after it’s accrued. That’s also why there’s a delay between closing and your initial mortgage payment. Lenders need time to let the first month’s interest accrue.
If you close early in the month, it could be nearly two months before your first mortgage payment is due. What happens to the interest that accrues during those extra days? Its impact is felt at closing. That’s why savvy homebuyers weigh the matter of their closing dates carefully. As part of your closing costs, you’ll be required to prepay the interest for the days when you will own the house without making a mortgage payment. As HomeLight reports, there’s a calculated balance between closing costs and initial mortgage payments that knowledgeable homebuyers can use to their advantage:
- Closing Early in the Month: An early closing means that you’ll prepay the most in interest. However, you’ll also enjoy the longest stretch of time before your first mortgage payment comes due.
- Closing in the Middle of the Month: Aiming for the middle of the month offers a safe approach. You’ll prepay a fair amount of interest, but you’ll have a fair amount of time before your first payment. Plus, you’ll have a little extra time if closing gets pushed back unexpectedly.
- Closing at the End of the Month: Closing at the end of the month can save you on closing costs because you’ll pay less in interest, but it’s a busy time for those involved with real estate transactions, so you run the risk of having your closing delayed. You’ll also have less time before your first mortgage payment is due.