When Is Your First Mortgage Payment Due? A Big Surprise

surprise-boxWhen the First Mortgage Payment is Due:One of the Biggest Surprises a St. Louis Home Buyer will Discover

When is your first mortgage payment due?  After working with buyers for more than a decade, it’s always fun to give someone good news.  One of the biggest pieces of good news about the home buying process is when your first mortgage payment is actually due.

Daylight Savings Time and First Mortgage Payment Due-What Do They Have in Common?

One of the things I love about Daylight Savings Time is the feeling that I’m getting more time.
More time in the day to be outside and enjoy more of life’s activities … freedom and options.
Did you know that after you close on your new home that you can  have some financial breathing room … and not have a mortgage payment due for at least a month?   Look at the chart below:

When Your First Mortgage Payment is Due

The Month You Close 1st Mortgage Payment Due
JanuaryMarch 1st
FebruaryApril 1st
MarchMay 1st
AprilJune 1st
MayJuly 1st
JuneAugust 1st
JulySeptember 1st
AugustOctober 1st
SeptemberNovember 1st
OctoberDecember 1st
NovemberJanuary 1st
DecemberFebruary 1st

If There’s No Such Thing as a Free Lunch How Can I Skip a Month
Before My  First Mortgage Payment is Due?

Let’s be clear here: Banks are not in business to give anything away.  What we’re talking about is your cash flow and when payments are actually due.  To understand how a mortgage works you need to understand amortization.  Amortization is your unpaid balance which is re-calculated every month and by the end of your mortgage period, your loan will be paid in full.

TaxiTaxi Fares and Mortgage Prorated
Interest Payments

When that yellow taxi pulls up to your place to take you to the airport, the meter starts running once it arrives.  If you’re inside watching re-runs of Breaking Bad and you take your time getting out to the cab, you will pay for the cabbie’s wait … not just the distance to the airport.
Likewise, once you sign for your new home, the bank has figured out what the interest due is, broken down on a daily basis (pro-rated).

Here’s how it works: Let’s say that you close on May 28. You’ll have to pay three days of interest – May 29,30 and 31-that ordinarily would be due with your June payment. They call it “odd days interest” or “prepaid interest.”  If you choose to close on May 15th, however, you will owe 16 days of prepaid interest (from May 16-31) If your interest charges are running $25 a day, the difference between 3 days and 16 days would be $325. Whatever your prorated interest is, it will show up on your closing statement.

Multiple-hands-stretching-dollarBottom Line:  There’s no real cost savings as you’ll either pay now or later. However, it can really give you some breathing room for your cash-flow. Either way, your first payment would not be due until July 1st.  After having to come up with thousands of dollars at closing along with moving costs, utility deposits, etc. postponing that first mortgage payment as long as possible might be the best course of action for you.  Discuss your particular options with your lender and choose the best day to close.

Click Here if You Would Like to Find a Smarter, Faster and Better Way to Buy a Home

Cover of Things to Consider When Buying a Home

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