It’s often noted that there are benefits to closing on a home you’re buying at the end of the month. Are there any advantages to closing at the beginning or middle of the month? What’s the difference? If I’m buying a home for a certain price, why should it matter when I close? If you’re obtaining a mortgage, the day you close will determine how much money you need to bring to closing. It won’t, however, change the monthly date your payments will be due. Let’s say your due date is the 1st of each month. Then you won’t have a mortgage payment due until the first of the second month after you close. So now let’s break down “best day to close” theory.
Because mortgages are paid in arrears (for the month passed), the date you close will determine how much money you have to bring to closing as you’ll be paying the interest needed to cover the remainder of the current month.
Examples:
If you close on May 6th, you will need to bring enough money to closing to cover 25 days of interest for that month (31 days in May – closing on May 6 or 31-6 = 25 days of interest due).
If you close on May 28th, you will only need to bring enough money to closing to cover 3 days of interest for that month (31-28 = 3).
With either option, because you’re closing in May, you won’t have a mortgage payment due until July 1st. So, if you’re already stretching yourself to have enough funds for your down payment at closing, setting your date at the end of the month will reduce the amount f cash you’ll have to bring. Closing at the beginning or middle of the month will require you to bring more cash to closing but you will have more time in the home before your first mortgage payment is due. This might be helpful if you need to get kids registered for school or start your new job, etc.