You’ve made it to the finish line! After finding the perfect house and navigating the mortgage application process, you finally have a closing date when you can take ownership of your new home. As you prepare for the meeting to sign the loan documents, you probably have a very important question: When do mortgage payments start?
The answer depends on your closing date. As a mortgage broker in Houston, we can help you make sense of the timeline and ensure you get off on the right foot by making the first payment due after closing on time.
Setting the Due Date for Your First Mortgage Payment
Although some home buyers expect to make their first mortgage payment at closing, for the vast majority of buyers, the payment is due on the first day of the month, 30 days after the closing. In other words, if you close on your home on April 23, your first payment is due on June 1.
This does not mean that you get a “free” month in your new home. The lender will roll prepaid interest for the first month into your closing costs, prorating the interest rate for the number of days between the closing and your first payment. Therefore, the later in the month that you close, the fewer days that you’ll have to prepay interest, which can reduce the closing costs.
If you choose to include property taxes in your mortgage payment, then the prorated amount for those payments will also factor into your closing costs. Again, the later in the month you close, the less you’ll pay at closing.
How Lenders Apply Your Payments and What It Means to You
In addition to wanting answers to “When do mortgage payments start?” home buyers also want to know when the payments will end. Understanding how lenders apply your payments to the mortgage balance every month can help you be more strategic about when you make payments and reduce how much you pay over the life of the loan.
When you pay the monthly mortgage bill, the lender first applies the payment to the interest due, then the remaining amount to the principal. At first, the majority of each payment goes toward interest. Depending on the interest rate, it could be quite a few years before you see any measurable decrease in the loan principal.
However, being smart about managing a home mortgage can reduce the principal faster and, in turn, reduce how much interest you pay. One effective option involves paying the bill a few days before the due date each month. By paying a few days early, you’ll eventually put yourself ahead of the payment schedule by a month, reducing the number of months the loan will be in repayment.
Paying your mortgage biweekly can also help reduce the overall length of the loan. If your lender allows and doesn’t charge hefty fees for prepayment, paying half the mortgage amount every two weeks instead of the full amount once a month equals 13 monthly payments, which pushes up the payoff date.
Get All the Information You Need for Successful Home Buying
Knowing “When do mortgage payments start?” can help you plan for your homebuying journey and budget more accurately. You do have some breathing room between closing and the first payment due date but be aware that the closing costs will include interest.
Champions Mortgage can help you make sense of every step of the mortgage process, from the application through the mortgage maturity date. Call us at (281) 727-2500 to speak with an experienced mortgage lender and get the answers you need.
