Is it Cheaper to Close Your Home at the Beginning of the Month or End?

Is it Cheaper to Close Your Home at the Beginning of the Month or End?

I’ve been asked this ever since I began selling real estate. Here’s the short answer so you don’t have to read further, IT DOES NOT MATTER. If you want the details, just read on.  

You’ve heard the old saying, ‘There’s no free lunch’. Well, it applies to the timing of closing on your new home too. The money in question is the prepaid interest on your loan. It’s paid in arrears.  

Your first house payment is always due the 2nd month after you close. Some people reason that if they close in the beginning of the month they will ultimately pay less because their house payment gets put off longer. In this example, say you close June 1.  Your first payment is not due until Aug.  Now, let's say you close the end of June. Your first payment is still due in Aug.  So, in the first example is SEEMS like you are getting a break because you’ve owned the house a full month longer than in the second example and your payment is due at the exact same time. You got a free month’s worth right?  Wrong.  

Let’s look back at the first example.  Closing at the beginning of the month means you have to bring more prepaid interest to the closing table. That’s right - an extra  month’s worth. Your first payment is further out BUT you pay more upfront. 

Now, let’s look at the second example where you close at the end of the month. Your payment is due a month sooner BUT you didn’t have to bring a month of upfront interest to closing. Both options cost you the same - no free lunch. 

Need a deeper dive into mortgage payments, interest and closing costs? As an active local Dayton Realtor I can help guide you along on your next home purchase.