Closing - Beginning or End of the Month
Tim makes a very good point here on the timing to plan your closing. It is less cost for the Buyer, the closer the closing is to the end of the month. Joy
It is very important to be strategic when writing an offer so that your goals and objectives are defined and met. Work closely with a reputable local lender to determine your strengths and weaknesses of a buyer. Closing at the beginning or end of the month can have financial advantages and disadvantages.
First, you must understand that mortgage interest on your mortgage begins accruing on the date that you close on your property. The majority of mortgages are due on the first day of the month. At the closing table you will pay (PITA) Principal, Interest, Taxes, and Insurance from the date of closing to the last day of the month. Please note that the majority of this payment goes towards the mortgage interest. This can be a detriment to the buyer who is strapped for cash. If you close on February 28th then you will have to pay for one day of PITI to cover the remainder of February. In this example, April 1st would be your due date for your first mortgage payment.
For the buyer who is low on Cash, I would highly recommend closing at the end of the month.
Closing at the beginning of the month can have some positive attributes as well. Let’s say that you closed on March 2nd. In this case, your first payment would not be due until May 1st or 60 days later. In this case you would be responsible for paying 29 days of PITI. Yes, closing costs will be a bit more but you will be in your home sooner giving you more time to clean, decorate, and enjoy your new home.
Tim Bray (B.S Real Estate & Urban Economics - UCONN)
William Pitt Sotheby's Intl Realty
22 E Main St, Mystic CT 06355
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