The Mortgage Interest is Paid After It Occurs
The interest on the mortgage is paid after it occurs, not before. The interest on the mortgage begins to accrue at the closing of the deal and does not stop until the full amount due is paid off. You will pay interest on the amount you closed the deal on at the time of closing.
Principal is Paid Upfront
The mortgage payment consists of two main parts: interest and principal. An upfront payment is made for the following month. Each principal payment reduces the amount you owe. You will pay interest on a smaller amount in the following month.
Let’s Try the Calculations
Assume you borrowed $200,000 at a 5% interest rate. The monthly payment will be $1,073.64 for 30 years. You can calculate your daily interest for the period leading up to the first payment, which is 30 days before the first payment is due, by multiplying $200,000 by the 5% interest rate, which equals $10,000. Then, divide this number by 12 months to get $833, and then divide the result again by 30 days to get $27.78.
Conclusion
You can avoid paying all the accrued interest upfront at closing if you close as close as possible to the end of the month. You will have a longer period before the first mortgage payment is due if you close at the beginning of the month, but you will have to pay a large amount of interest for that month when you close the deal. You are likely to welcome some temporal embrace between the closing and the due date of the first mortgage payment, given the large amount you will pay at closing. But you are not actually skipping any payments. While it may seem like you’re getting a free month in rent payment, you are not, in fact.
Frequently Asked Questions (FAQs)
1. How long does it take to make the first mortgage payment after closing?
Since the first mortgage payment is always due in the first full month after closing, it will typically be between one and two months after completing the home purchase.
2. When is a mortgage payment considered late?
Most mortgage contracts include a grace period after the monthly due date during which the payment is not considered late. This period usually ranges from 15 days. If the payment is due on the first of the month, the lender will accept the payment until the 16th day without late fees or penalties. Late payment will not be reported to credit bureaus until at least 30 days have passed.
3. What happens if I miss a monthly mortgage payment?
If you are more than 30 days late on your monthly mortgage payment, the lender may report you to credit bureaus, which will result in a drop in your credit score. The lender will likely try to contact you to inquire about your delay and will attempt to work with you to get back on track. If your delinquency continues for more than three to six months, the lender will begin foreclosure proceedings, and you will face the risk of losing your home.
Source: https://www.thebalancemoney.com/when-is-your-first-mortgage-payment-due-1798393
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