Is It Better to Close on a House at the End of the Month?

Purchasing a home involves various financial considerations. The closing process marks the official transfer of ownership, settling many expenses. The specific date chosen for closing can have financial implications for both the buyer and seller.

Prorated Expenses at Closing

When a home sale concludes, certain recurring expenses are prorated. This means they are divided between the buyer and seller based on the number of days each party owns the property during a billing period. Common examples include property taxes and homeowner’s association (HOA) fees, which are typically calculated daily.

If property taxes are paid annually and a closing occurs mid-year, the seller is responsible for taxes up to the closing date, and the buyer assumes responsibility from that day forward. Closing closer to the end of a billing cycle for these expenses can mean a smaller upfront payment for the buyer, as the seller covers most of that period’s charges.

Impact of Mortgage Interest Calculation

Mortgage interest operates on an “in arrears” system, meaning interest accrued during a month is paid at the beginning of the following month. At closing, buyers typically prepay interest from the closing date through the end of that current month. This amount is included in the closing costs.

If a closing occurs late in the month, such as on the 28th, the buyer would only prepay interest for the remaining few days. Conversely, closing at the beginning of the month requires prepaying interest for almost the entire month. While total interest paid over the loan’s life remains the same, closing near month-end can reduce the immediate cash needed at settlement for this item.

Other Closing Costs Considerations

Beyond prorated expenses and prepaid mortgage interest, numerous other costs are associated with closing on a home. Many of these are not directly influenced by the specific day of the month. These fixed fees include charges from the lender, such as loan origination, underwriting, and appraisal fees. Title-related expenses, like title insurance premiums and title search fees, are also consistent regardless of the closing date.

Attorney fees, if applicable, and recording fees to register new ownership, are also part of these fixed costs. Buyers often establish an escrow account at closing to cover future property taxes and homeowner’s insurance premiums. The initial funding for this account is based on a set number of months and does not fluctuate based on the closing date.

Practicalities of Closing Date Selection

While a month-end closing might offer financial advantages, especially concerning prorated expenses and prepaid mortgage interest, practical considerations often determine the final date. The availability of all parties, including the lender, real estate agents, attorneys, and title company representatives, influences scheduling. Closing dates are typically set 30 to 60 days after an offer is accepted, allowing time for loan approval, inspections, and appraisals.

Sellers’ move-out schedules and buyers’ moving logistics also impact date selection. Prioritizing convenience and ensuring a smooth transition for all parties sometimes outweighs potential minor financial adjustments. Ultimately, the chosen closing date balances financial optimization and the logistical realities of a complex transaction.