Special offer

DO NOT Close at the end of the month....

By
Mortgage and Lending with CMG Home Loans NMLS 248937

 

There is a misconception in the Real Estate world that it is better to close at the end of the month: It isn’t.

(I could stop right there, but I will explain)

This line of thought comes from odd interest. When you close on a mortgage you will pay interest for the remaining days of the month you close- so that last day you will pay just 1 day’s interest. So on a $250,000 loan if rates are at 5% that would be $34.25/day up to $1,027 for a month.

So yes, it is a little less money at closing at the end of the month BUT:

  •          When you close on the last day of the month, your first payment is due in 30 days, you close in the middle of the month, you have 45 days, and the beginning of the month- yup close to two months before you have to write out that first mortgage check. It all comes out the same in the long run, even when you pay off your loan on the other end.
  •          If you close the first few days of the month you can request an interest credit and make it even cheaper than the last few days of the month. So close July 31, you pay $34, or August 3 and get a credit for $102 (with the same September 1st due date for the first mortgage payment)

That’s the math side of the equation, but there is a much broader picture to consider. Everyone is still trying to close in the last few days, and everything is harder, especially if there is a last-minute change which we all know can happen.

  •          Need a mover? It is much easier to get one early in the month or mid-month, and if you need that last minute change- much easier as well.
  •          Not using a mover? Rental trucks also become scarce at the end of the month. Most rental leases expire at the end of the month, so there is a lot of competition for trucks. (pay attention next time you are driving around on the last weekend of the month, you will see a lot of people driving around with their lives packed up in a truck!)
  •          Settlement agents are busier than the proverbial 1 armed paper hanger- so picking and choosing where and when you will be closing becomes more difficult.
  •          Wires. You would think they would be instant, but they are not. All wires go through the FED, and at the end of the month they can be slow, especially on the last Friday of the month.

I could go on and on and delve into utilities, appliance deliveries etc. All of these services can be bogged down at the end of the month. Last month I saw all of the above- One client had to settle on a smaller truck and make multiple trips- Thankfully the move was not far. One had to drive an hour to closing because the settlement agent was only available at 9am, and only at their office, (while the day before they would have closed locally). I had a closing get delayed because the Seller’s mover was not available…. That one was pushed from June into July. Lastly- I had a client sell the old and close on the new- the wire of the funds from the old house for their down payment was delayed and did not show up till the end of the day. 

Thankfully we managed the closings on the mortgage side w/o any additional stress to our buyers, but there certainly was a lot of internal stress for my processor and myself as we pushed to get a months worth of work into one week of the month.

If you want things to run smother for your closing, you should consider changing your mentality and move the closing to early or mid month and stay clear of the last week of the month it will also help us all maintain our sanity.

 

Robert Rauf 
Mortgage Loan Originator NMLS# 248937
http://www.homebridge.com/RobertRauf 
or my blog: http://activerain.com/blogs/rrauf 
Office: (732)908-4868  Cell (732)740-0175 

RRauf@HomeBridge.com 
www.RobertRauf.com
 
 

Since 1987 I have been helping my clients fulfill their dream of home ownership! HomeBridge Financial Services, Formerly REMN, HomeBridge Financial Services is located at 9 Grand Ave, Building 2 Suite A Toms River, NJ 08753. NMLS #6521. New Jersey Licensed Lender and Mortgage Banker #L041053. Visit www.Homebridge.com for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721, Manchester 08757 08733, Manahawkin 08050, Robert Rauf is a Licensed Mortgage Loan Originator in New Jersey.

 

Comments (10)

Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

I agree Robert Rauf, earlier in the month when the escrow companies are not swamped with multiple other closings. Also close in mid week and not on Friday. If something needs to slip 1 day, you can still close by the weekend and not have to wait to the following Monday. Buyers like that so they can start moving in on Saturday.

Jul 18, 2018 11:19 AM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Most close at the end to have closing costs as low as possible

Jul 18, 2018 11:33 AM
Robert Rauf
CMG Home Loans - Toms River, NJ

Jeffrey Masich- Arizona Associate Broker,MBA &GRI It has been an on going theme my entire career... but all came to a head in June for me.  always difficult to manage for third party issues 

Jul 18, 2018 11:34 AM
Robert Rauf
CMG Home Loans - Toms River, NJ

William Feela - That can easily be managed for, take a look back at my blog- it can be even cheaper at the beginning of the month with an interest credit.

Jul 18, 2018 11:36 AM
Erika Rae Albert, Austin Real Estate Expert
E-Rae Realty - Austin, TX
Exceeding Expectations in Every Transaction

Interesting, I had never thought about the interest implications.  I always advise not closing the last day of the month or week, but that's due to issues with revised settlement statements etc when a closing gets a small delay.  

Jul 19, 2018 11:19 AM
Robert Rauf
CMG Home Loans - Toms River, NJ

Erika Rae Albert, Austin Real Estate Expert there are so many things to consider, and to a certain extent- every buyer will be slightly different, but it is a good rule of thumb to avoid the last week of the month, it will be beneficial for all involved to spread things throughout the month.

Jul 19, 2018 11:38 AM
Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

Great information Robert Rauf . Thank you.

Sep 12, 2018 05:38 PM
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I think it's an "it depends" thing.  For first time buyers sometimes I suggest they close ON the first. Yes they have a payment due in 30 days, but no closing day cost.  Otherwise I suggest 5 to 7 days before the end of the month.   And in my market it also depends on which month because we are summer seasonal in a heavy vacation home market.  So in winter it's not bad to be scheduled for the last day of the month.

Sep 12, 2018 10:42 PM
Robert Rauf
CMG Home Loans - Toms River, NJ

Tammy Lankford, You are correct, it is a bit of an "it depends thing" but in my market- the misconception of saving $ often makes the end of the month an unecessary fire drill with waves that go way beyond the few days interest.

Sep 17, 2018 07:47 AM
Robert Rauf
CMG Home Loans - Toms River, NJ

Bob "RealMan" Timm Thanks for reading!

Sep 17, 2018 07:49 AM