Skipping 2 house payments

Reblogger Dale Taylor
Real Estate Agent with Re/Max 10 New Lenox Illinois

Below, Dave gives the answer to a question I am most often asked by Valued First-time Buyers who are scraping every penny together to cover their down-payment and/or closing costs.  The question is what time of the month should we close inorder to go the longest period of time before we make our first mortgage payment? 

Original content by Doug Walker NMLS#: 274064

Skipping a house payment is actually used occasionally as a marketing strategy for refinancing.  It is especially nice around the holidays when extra cash is always needed.  It is pretty common knowledge that a payment is not necessary the month following a new mortgage closing, but there is actually a way to skip 2 payments.  If the refinance is closed by the 15th of January, for example, a homeowner can roll their January payment into the loan by just letting the accumulated interest due for December be added to the payoff.  Since the first payment on the new note is due in March, they skip the February payment.  Voila!  2 payments skipped.

Buyers can also use a similar strategy to time their transaction and minimize the amount of cash needed at closing. If a buyer closes on the loan before the 10th day of the month, we can actually pretend (from the pro-rated interest aspect at least) that it closed at the end of the previous month.  The mortgage company actually gives the buyer an interest credit from the 1st to whenever the loan closes.  This is usually allowed for up to 10 days.

This option reduces the amount of cash needed to close the transaction, but it accelerates when that first payment is due.  This will put the note's first payment date as the 1st of the following month, effectively making the first payment due in 20 days or so.  If a buyer is strapped for cash and can make that first payment in a few weeks after another paycheck, closing before the 10th of the month is the cheapest time of the month to close a purchase transaction.

On the flip side....If the buyers have the extra money for the pro-rated interest and the closing is scheduled for the first part of the month, I recommend that they pay the interest to finish out the month.  Then their house payment is put off until the 1st of the month following the next month - 50-60 days away!  Paying a few hundred dollars in interest is a cheap way to put their FULL PITI payment off another month.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
228,638
Dale Taylor
Re/Max 10 New Lenox Illinois - Frankfort, IL
Realtor = Chicago Illinois Homes Townhomes Condos

Sorry, I meant to acknowledge Doug as the original author of this blog.  It funny how the mind will think of one name and the fingers will type another!  LOL

Jan 14, 2012 03:18 PM #1
Rainmaker
1,004,473
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Dale... what I often do when I am selling a new home... is have the buyers close on the 2nd or the 3rd of the month.  Then, I arrange for the seller... the builder... to pay all of the buyer's closing costs and prepaids... (within the limits of the mortgage... usually six percent of the loan amount.)

That way... the buyers can close, they can limit the cash they must bring to closing, and they also get to go almost two months before they have to make a mortgage payment.

Jan 14, 2012 03:24 PM #2
Rainer
112,028
Carlotta Remong
Berkshire Hathaway HS N.E. Prime Properties - Newport, RI

Dale thanks for reposting Doug Walkers post it is important information and it may come in handy in the future,

Jan 14, 2012 03:27 PM #3
Rainmaker
228,638
Dale Taylor
Re/Max 10 New Lenox Illinois - Frankfort, IL
Realtor = Chicago Illinois Homes Townhomes Condos

Thanks Karen and Carlotta!

Jan 14, 2012 04:37 PM #4
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
228,638

Dale Taylor

Realtor = Chicago Illinois Homes Townhomes Condos
Ask me a question
*
*
*
*
Spam prevention

Additional Information