Do You Pay a Mortgage the First Month?

A common question for new homeowners is when their first mortgage payment will be due. Many assume the payment is required in the month immediately following closing, leading to confusion when their first bill does not arrive as expected. Understanding this timing is important for financial planning and avoiding surprises. This article clarifies how mortgage payments are structured and what to anticipate regarding your first payment.

Understanding Your First Mortgage Payment Due Date

Your first mortgage payment is typically not due in the month immediately following your closing date. Instead, it is commonly scheduled for the first day of the second month after closing. For instance, if you close on your home in January, your first regular mortgage payment would generally be due on March 1st. This timing provides a period of about 30 to 60 days between your closing and the initial principal and interest payment.

The specific closing date within a month impacts the exact amount of time you have before your first payment. If you close early in a month, for example, on June 1st, your first payment would be due on August 1st. Conversely, closing later in the month, such as June 25th, means your first payment is still due on August 1st. Your promissory note, a document signed at closing, will specify your exact first payment due date and other loan details.

The Concept of Interest in Arrears

The reason your first mortgage payment is not due immediately after closing relates to the concept of “interest in arrears.” This means that mortgage interest is paid for the period that has already passed, not for the upcoming month. Unlike rent, which is typically paid in advance for the current month, mortgage interest accrues over a month and is then paid at the beginning of the following month.

For example, a mortgage payment made on October 1st covers the interest that accrued during September. While this provides a brief period without a scheduled monthly payment right after closing, it is important to understand that interest still begins to accrue from your closing date. The principal portion of your mortgage payment, however, is generally paid in advance for the upcoming month, reducing your loan balance for future interest calculations.

What You Pay at Closing

While your first monthly principal and interest payment is delayed, you will pay certain amounts at closing that cover the initial period of homeownership. One significant item is “prepaid interest.” This charge covers the daily interest that accrues on your loan from your closing date up to the end of that same month. For example, if you close on October 17th, you will prepay interest for the remaining days of October.

This prepaid interest ensures the lender receives interest for every day the loan is outstanding, even before your first regular monthly payment begins. The amount of prepaid interest depends on your loan amount, interest rate, and the number of days remaining in the closing month. This charge is detailed on your Loan Estimate and Closing Disclosure forms. Besides prepaid interest, other common prepaid expenses at closing include initial deposits into an escrow account for future property taxes and homeowners insurance premiums.