Owning a home comes with plenty of extra expenses, from closing costs to home furnishings, paint supplies, and repairs.
That’s why it’s important to understand the timing of your initial mortgage payment. For many, your first mortgage due date happens more than 30 days from closing. But knowing your specific due date schedule will better help you budget for all the other costs that pop up during a move.
In fact, some lenders even require that you have cash on hand for such surprise expenses: “Beyond the down payment, buyers should also save for reserves that might be required by the lender,” says Sunnie Li, broker and co-founder of Sala Homes Realty and Development.
It’s a lot easier to plan ahead when you know what kind of cushion you’re working with after move-in. Here’s how to know exactly when your first mortgage payment will be due.
When Is My First Mortgage Payment Due?
Typically, a borrower’s first mortgage payment is due on the first day of the month after they’ve owned the home for at least 30 days. Add 30 days to your closing date, then go to the first day of the following month. For example, if you close your loan on February 15, your first mortgage payment would be due on April 1 .
When it comes to budgeting, be mindful of this window of time in which it’s common to make major purchases like furniture and appliances.
Buying a house means you’ll likely have a lot of large expenses in a short time frame. By having a healthy amount of cash reserves, you’ll be better prepared regardless of when certain bills are due.
Will My First Mortgage Payment Be Higher?
In most cases, your first payment after closing will not be any higher or lower than the regular monthly payments you will be making in the future. Monthly payments on a mortgage loan are calculated off your loan amount, interest rate, and term of the loan selected. Payments are then amortized over the loan term such that each monthly payment is the same dollar amount.
One thing to note here though is that this applies only to the principal and interest portion of your loan. If you have an escrow account that includes property taxes and homeowner’s insurance with your regular monthly payment, you could see your mortgage payment changing whenever your taxes and insurance bills are recalculated. This often occurs on an annual basis.
Another circumstance where your initial mortgage payments could be higher is if you selected an adjustable-rate mortgage. With this type of mortgage loan, it’s possible that subsequent rate adjustments could result in your interest rate dropping, thus reducing your mortgage payment.
What Factors Affect My First Mortgage Payment?
Here is what is typically is included in a monthly mortgage payment:
Principal and Interest
For most mortgage loans, your payment will be amortized over the loan term, resulting in equal payments each month, with a portion going towards principal and interest. The interest portion of your loan is calculated off the loan’s outstanding principal balance. On a brand new loan, payments will be applied mostly towards interest. As you continue making payments on the loan, the balance will gradually decrease, and a larger portion will be applied towards the principal balance of the loan.
Depending on your loan, you may be required to include a pro-rata portion of property taxes with your monthly mortgage payment. For example, if property taxes are $3,600 annually, you may be required to pay $300 monthly for this portion of your mortgage payment. Even if not required, some borrowers choose to do so voluntarily for the added convenience of having the lender pay taxes on their behalf when they become due. Lenders typically adjust this amount when property taxes are re-assessed.
Similar to property taxes, some borrowers may be required to include homeowners insurance with the monthly mortgage payment, while others opt to do so voluntarily out of convenience. Since most insurance companies issue renewals annually, this part of your mortgage payment could vary once you receive your renewal premium.
Private Mortgage Insurance (PMI) or Mortgage Insurance (MI)
Unlike homeowner’s insurance that offers protection for you as the homeowner, private mortgage insurance (PMI) protects the lender in the event you are unable to continue making payments on your conventional loan. PMI is typically required on loans that have a down payment of less than 20%, and can be added to your monthly mortgage payment. Mortgage insurance (MI) is required for other loan types, such as an FHA loan. Depending on the terms of your loan, PMI may be removed once you accumulate 20% equity in your home. PM and MI could be ended by refinancing to a brand new loan altogether.
Best Time of the Month to Close on a Mortgage
As long as it aligns with your time table for things like moving, relocating, or taking advantage of a lower rate, there’s no real advantage of trying to have your closing occur at a certain time of the month, says Victoria Sy, a licensed Loan Consultant at LoanDepot. “Loans don’t age like wine. Just close it when you can at the earliest date. Otherwise, you could risk paying rate lock extension fees.” Sy also states that you run the risk of having loan documents expire, and having to provide updated items to the lender could result in additional questions and delays waiting for their review of the new documents.
Here are a few examples of what that might look like if you close your loan at the beginning, middle, and end of a month:
Beginning of the Month
Closing early in the month means you’ll have nearly two months before your first payment is due, since your first mortgage payment is typically due on the first day of the month after you’ve been in the home at least 30 days. As an example, if you close on February 3, your first payment will not be due until April 1.
Your closing date will also affect how much cash you’ll need to close the loan. Interest on a mortgage loan is paid in arrears, which means that a payment due in March would cover the interest for the month prior in February. By having a February 3 closing date, daily interest charges for the remaining 26 days of the month will be added to your closing costs. Your first mortgage payment due April 1 due date would then cover the interest accrued for the month of March.
In other words, by closing at the beginning of the month, you’ll have more time before your first mortgage payment is due, but you’ll owe a bit more in interest charges at closing.
End of the Month
Closing at the end of the month, say on February 28, would mean that your first mortgage payment due date would be April 1. That gives you just over 30 days, but you would reduce your upfront closing costs because you would only have to pay for a single day’s worth of prepaid interest for February 28.
Middle of the Month
Finally, if you close in the middle of the month on February 15, you would have about 45 days before your first mortgage payment due date of April 1. And your closing costs would have an additional 14 day’s worth of prepaid interest for February 15 through the end of the month.
“It doesn’t really matter when you close during the month since you pay for the mortgage starting from the day you close,” advises Li. “Only after you close will you as the buyer be responsible for any fees.”
What If I Miss My First Mortgage Payment?
While mortgages typically have a due date on the first day of the month, many have a grace period through the 15th day of the month. This means that as long as the lender receives your payment by the 15th, no late fees will apply, and the payment will be considered on-time. (Be sure to double check with your lender, however.)
Payments not made in a timely manner could be subject to late fees. Policies may vary among lenders, but if you are more than 30 days late, you could be reported as delinquent to the credit bureaus, something that will negatively impact your credit score.
If you realize you’ve missed a payment and are past your loan’s grace period, try contacting your lender as soon as possible and make a payment immediately. In certain cases, the lender may waive late fees, or agree to not report you delinquent to the credit bureaus if they are aware of your situation. To avoid the possibility of missing a payment, stay on top of your budget, enroll in auto-pay, and give yourself a monthly recurring reminder to ensure the payment is applied to your account.