is it better to close at the end of the month

The Best Time of the Month to Close on a House Should You Aim for the End?

Purchasing a home is an exciting yet stressful process. As you get closer to the finish line, you’ll need to choose a closing date – the day when you finally get the keys and officially become a homeowner This date might seem insignificant, but picking the right time of the month to close can save you hundreds or even thousands of dollars. So when is the ideal closing date? Generally, it’s better to close at the end of the month, but there are a few factors to consider.

In this comprehensive guide, we’ll break down how closing dates impact your finances, the pros and cons of closing early or late in the month, and other things to keep in mind as you pick your ideal date. Read on to ensure you choose the optimal closing timeframe when buying your dream home.

How Closing Dates Affect Your Mortgage Payments

First, it’s important to understand how your closing date will impact your mortgage payments. Here are some key things to keep in mind:

• Your first mortgage payment will be due the first of the second month after closing. For example, if you close on March 15th, your first payment will be on June 1st.

• Closing early in the month does NOT allow you to “skip” a payment. You still owe interest from your closing date through the end of that month.

• However, closing early does push back your first payment by an extra month compared to closing late in the month.

• The total interest paid over the life of the loan will be the same regardless of closing date. But closing early causes you to pay more interest upfront.

As you can see, when choosing a closing date, you essentially have to pick between paying less money now (closing late in the month) or delaying your first payment by an extra month (closing early in the month). For most buyers, saving money upfront takes priority. But for some, delaying that first payment could be helpful.

The Financial Impact of Closing Early vs. Late

To demonstrate how closing early or late impacts your finances, let’s look at an example:

• House price: $250,000
• Interest rate: 4%
• Closing early (March 1st): You’ll owe around $766 in interest for March.
• Closing late (March 27th): You’ll only owe around $55 in interest for March.

Over the life of the loan, you’ll pay the same amount overall either way. But by closing late in March, you save $711 that first month. This example shows why most buyers prefer to close at the end of the month. Of course, the exact savings depend on your loan amount, interest rate, and how early or late you close. But closing late generally saves you hundreds of dollars.

Pros of Closing Early in the Month

While closing late is ideal for most, there are some potential benefits to closing early in the month:

• Your first mortgage payment gets delayed an extra month, which helps with budgeting if money is tight.

• Scheduling may be easier earlier in the month when things are less hectic.

• You avoid the chaotic end-of-month rush, reducing stress and chances of mistakes.

Cons of Closing Early in the Month

However, there are also some notable drawbacks to be aware of:

• You pay hundreds or thousands more in interest at closing.

• HOA fees on the new property may start accruing sooner.

• If the seller is covering closing costs, they pay more with an early closing.

Other Factors to Keep in Mind

Aside from the closing date itself, a few other things may impact your decision:

• Consider overlap with your current lease if you’re renting. Aligning the closings closely could save you paying double rent.

• For refinances, watch out for overlapping interest payments between your old and new loan.

• If you currently have no mortgage, closing at any point in the month works fine.

The Bottom Line

While closing early in the month might seem appealing, for most buyers, it’s better to close at the end of the month. This strategy saves you substantial money on interest at closing. However, if delaying your first payment would help with budgeting, closing early may be worth considering. Either way, pick a timeframe that aligns with your financial needs and minimize overlapping costs from rent or your current mortgage. With the right closing date, you can start off your homeownership journey with maximum savings.