When is my first post-closing mortgage payment due?
Owning a home comes with many additional costs, from closing costs to fixtures, painting supplies, and repairs.
Because of this, it’s important to understand the timing of your first mortgage payment. For many, your first mortgage’s due date occurs more than 30 days after closing. However, if you know your exact due date schedule, you’ll be better able to account for all the other costs that will come up during a move.
Some lenders even require you to have cash on hand for such surprise expenses: “Beyond the down payment, buyers should also save for reserves the lender may need,” he says Sunnie LiBroker and co-founder of Sala Homes Realty and Development.
It’s a lot easier to plan ahead when you know what type of pillow you’ll be working with once you move in. So you know exactly when your first mortgage payment is due.
When is my first mortgage payment due?
Typically, a borrower’s first mortgage payment is due on the first day of the month after they’ve owned the home for at least 30 days. Add 30 days to your close date, then move on to the first day of the following month. For example, if you close your loan on February 15th, your first mortgage payment would be due on April 1st.
When budgeting, keep this window in mind when it’s common to make major purchases like furniture and appliances.
Buying a home means you are likely to have a lot of big expenses in a short period of time. By having a healthy amount of cash reserves, you’ll be better prepared regardless of when certain bills are due.
Will my first mortgage payment be higher?
In most cases, your initial payment upon completion will be no more or less than the regular monthly payments you will make going forward. Monthly mortgage loan payments are calculated based on your loan amount, the interest rate, and the term of the loan you select. The payments are then amortized over the life of the loan so that each monthly payment is the same dollar amount.
Note, however, that this only applies to the principal and interest portion of your loan. If you have an escrow account that includes property taxes and home insurance with your regular monthly payment, you might find that your mortgage payment changes when your taxes and insurance bills are recalculated. This often happens annually.
Another circumstance where your initial mortgage payments could be higher is if you have opted for an adjustable rate mortgage. With this type of mortgage loan, it is possible that subsequent interest rate adjustments will cause your interest rate to decrease and therefore your mortgage payment to decrease.
What Factors Affect My First Mortgage Payment?
Here’s what’s typically included in a monthly mortgage payment:
capital and interest
With most mortgage loans, your payment is amortized over the life of the loan, resulting in equal payments each month, with a portion used for principal and interest. The interest portion of your loan is calculated from the outstanding principal on the loan. On a brand new loan, payments are primarily used for interest. As you continue to make payments on the loan, the balance will gradually decrease and a larger part will be counted towards the principal amount of the loan.
Depending on your loan, you may need to include a prorated portion of property taxes in your monthly mortgage payment. For example, if property taxes are $3,600 per year, you may have to pay $300 monthly for that portion of your mortgage payment. Even when not required, some borrowers choose to do so voluntarily in order to have the lender pay taxes on their behalf when due. Lenders typically adjust this amount when property taxes are reassessed.
Similar to property taxes, some borrowers may need to include home insurance with their monthly mortgage payment, while others may choose to do so out of convenience. Because most insurance companies issue renewals annually, this portion of your mortgage payment may vary once you receive your renewal premium.
Private Mortgage Insurance (PMI) or Mortgage Insurance (MI)
Unlike home insurance, which protects you as a homeowner, personal mortgage insurance (PMI) protects the lender if you can no longer make payments on your traditional loan. PMI is typically required for loans with a down payment less than 20% and can be added to your monthly mortgage payment. Mortgage insurance (MI) is required for other types of loans, such as B. an FHA loan. Depending on the terms of your loan, PMI can be removed once you’ve accumulated 20% equity in your home. PM and MI could be ended altogether by refinancing into a brand new loan.
Best time of month to take out a mortgage
As long as it fits in with your schedule for things like moving, relocating, or using a lower plan, there’s no real benefit in trying to graduate at a specific time of the month, he says Victoria Sy, a licensed loan advisor at LoanDepot. “Loans don’t age like wine. Just close it if you can at the earliest opportunity. Otherwise, you could risk paying rate lock extension fees.” Sy also states that you run the risk of loan documents expiring, and providing updated articles to the lender could result in additional questions and delays if you click waiting for the new documents to be verified.
Here are a few examples of what that might look like if you close your loan at the beginning, middle, and end of a month:
beginning of the month
If you close early in the month, you have almost two months before your first installment is due, since your first mortgage payment is usually due on the first day of the month, after you’ve been home for at least 30 days. For example, if you close on February 3rd, your first payment will not be due until April 1st.
Your closing date will also affect how much cash you need to close the loan. Interest on a mortgage loan is paid in arrears, meaning a payment due in March would cover interest for the previous month in February. With a closing date of February 3, daily interest charges are added to your closing cost for the remaining 26 days of the month. Your first mortgage payment, due April 1, would then cover the interest accrued for the month of March.
In other words, if you close earlier in the month, you’ll have more time before your first mortgage payment is due, but you’ll owe a little more interest expense at closing.
end of the month
A close at the end of the month, say February 28th, would mean your first mortgage payment due date would be April 1st. That gives you a little over 30 days, but you would reduce your pre-closing costs since you would only have to pay for a single day’s prepaid interest for February 28th.
middle of the month
After all, if you close in the middle of the month on February 15th, you would have about 45 days until your first mortgage payment was due on April 1st. And your closing cost would have an additional 14 days of prepaid interest for February 15 through the end of the month.
“It doesn’t matter when you close during the month because you start paying the mortgage from the day you close,” advises Li. “It’s only after you’ve closed that you, the buyer, are responsible for any fees.”
What if I miss my first mortgage payment?
While mortgages are typically due on the first day of the month, many have a grace period of up to the 15th day of the month. This means that as long as the lender receives your payment by the 15th, there are no late fees and the payment is considered on-time. (Be sure to check with your lender, though.)
Late payments may be incurred for payments not made on time. Policies may vary by lender, but if you’re more than 30 days late, you could be reported as delinquent to the credit bureaus, negatively affecting your credit score.
If you find that you have missed a payment and your loan grace period has expired, try to contact your lender as soon as possible and make a payment immediately. In certain cases, the lender may waive late fees or agree not to report you as a defaulter to the credit bureaus if they are aware of your situation. To avoid the possibility of missing a payment, keep an eye on your budget, sign up for automatic payment and receive a monthly reminder that the payment will be credited to your account.