How Soon Do You Start Paying Mortgage After Closing?

A mortgage payment is a regular financial obligation to repay funds borrowed for a home. It typically includes principal, interest, property taxes, and homeowners insurance. New homeowners often wonder when their first payment is due after closing. Understanding this timing is crucial for financial planning.

Determining Your First Payment Date

The first full mortgage payment is generally not due immediately after closing. Instead, it is typically scheduled for the first day of the second month following the closing month. For instance, if a home loan closes in January, the first regular mortgage payment would typically be due on March 1st.

This timing occurs because mortgage interest is paid in arrears. The payment covers interest accrued for the previous month. For example, a payment due on March 1st covers interest accumulated during February. This period between closing and the first payment allows the interest accrual cycle to begin.

The exact closing date within a month impacts the time until the first payment. If a loan closes early in the month, such as January 5th, the borrower will have a longer period until their first payment due date on March 1st. Conversely, if closing happens late in the month, for example, January 28th, the first payment is still due on March 1st, resulting in a shorter interval.

Understanding Prepaid Interest

At closing, borrowers pay “prepaid interest,” also known as per diem or interim interest. This payment covers interest accrued from the closing date through the last day of that calendar month. For example, a January 15th closing means paying 17 days of interest (January 15th to January 31st) at closing.

Prepaid interest ensures the lender receives interest for every day funds are outstanding before the first monthly payment cycle. This standard closing cost is detailed on the Closing Disclosure. Paying this interim interest at closing delays the first regular mortgage payment, which covers the entire preceding month’s interest, until the second month after closing.

Initial Escrow Account Deposits

In addition to prepaid interest, borrowers make initial deposits into an escrow account at closing. These funds are separate from the principal and interest payment. An escrow account’s purpose is for the lender or loan servicer to collect and hold funds for recurring property expenses on the borrower’s behalf.

These expenses commonly include property taxes and homeowners insurance premiums. The initial deposit builds a reserve in the escrow account, often covering several months of anticipated costs. This ensures the lender has sufficient funds to make timely payments when tax bills or insurance premiums are due, protecting both the homeowner’s and lender’s interests.