Home Buying in 08527>Question Details

Peg, Other/Just Looking in Edison, NJ

closing costs will be lower at the end of the month than at the beginning..please enlighten me on this

Asked by Peg, Edison, NJ Wed Feb 17, 2010

we had planned on closing on our home at the end of the month...now our lawyer is unavailable till after the beginning of the next month.....

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Peg if you close on Feb 28., 2010 there is no prepaid interest however your first payment will be do on April 1, 2010. If you close on March 1st, 2010 you will have to pay for 30 days of prepaid interest however your payment is due on May 1, 2010 as you paid for March ahaead and interest is paid in teh rears so on May 1 you are actually paying for the moth of April. I know this is oppositte of everything we are brought up to think, but that is a basic breakdown of the how the bank calculates payments. good luck with your closing
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Wed Feb 17, 2010
Peg,

As mentioned below,the only difference would be called your interest per diem. Example.. if you have a $200,000 mortgage and your rate is 5.0% and your daily interest paid on that loan is $27.40 a day.... if you closed at the middle of the month, you would need about $411. If you closed at the end of the month, with 5 days left, it would be $137. Now, many will say that if you closed on the 1st or 5th or so, that you would have to pay all of that interest. That is not always true, depending on what lender that you are using. At my company, we can do what is called an interest credit up until 5 business days of the new month. So if you closed on March 4th, you would pay no interest. The one thing to keep in mind though is that your mortgage payment would be due on April 1st. If you closed at the end of February and paid 5 days of interest, your payment would still be due April 1st. If you weren't allowed this interest credit and closed March 5th, then you would pay an additional $685, but your mortgage payment wouldn't be due until May 1st.

I hope this helps some and doesn't confuse you. If you are dealing with a loan officer now and they couldn't explain this properly, I would seek another loan officer. But in reality, this is the only true charge that would change. The only other one could be the property taxes, depending on how your escrow account is set up and what you will be reimbursing the seller, depending on the closing date.


Please don't hesitate to call me or e-mail me if you have any further questions.

Thanks,
jeff

Jeffrey J. Belonger
Area Manager

Infinity Home Mortgage Company, Inc
Processing : 800-587-2762
Cell : 609-440-5133
Fax : 775-361-6619
e-mail : jbelonger@ihmci.com
0 votes Thank Flag Link Wed Feb 17, 2010
Basically you pay the same in the long run, when you close at the beginning of the month you are paying more interest upfront than if you closed at the end of the month.
0 votes Thank Flag Link Wed Feb 17, 2010
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