This is Cheryl Morrison here. I am your local Chicagoland real estate attorney. Today I wanted to answer the question whether it best to close on your home purchase at the beginning of the month or the end of the month. And actually, like a lot of things in the law, it depends. There really isn’t a clear cut answer.
It really depends on your particular situation.
So when you buy a home if you have mortgage on that home, one of the closing costs that you’ll pay is a per diem interest. That’s from the date that you close until the end of the month. So if you close on the last day of the month you’ll actually only pay one day per diem interest.
Now if you close on the first of the month you’ll have 30 days of interest. So this could change how much money you have to bring to closing. It could be a thousand maybe more dollars more if you close at the beginning of the month rather than the end of the month.
So, if you’re looking to minimize the amount of money that you need to bring to closing it makes sense to have a closing date at the end of the month.
Now, if you have little leeway, and a little bit more cash-in-hand you might choose to still close at the beginning of the month. If you do that you’ll pay more in that per diem interest, however your first mortgage payment won’t be due until much later. Because when you close the very first of the following month you don’t make a mortgage payment. It’s the month after that.
So here we’re in January now. People who close in January they’ll make their first mortgage payment on March first; and if you close at the beginning of January you’ll have nearly two months then before your first mortgage payment is due. You’ll be able to use that extra cash in hand February maybe to paint your house or buy some new furniture.
Whereas, if you were to close at the end of the month of January, then you’ll only have about a month before that first mortgage payment is due.
So yes, it can be a little bit confusing to think about it but depending on your situation. Now, when you do close they’re going to let you know exactly when that payment is due.
Its a worthwhile discussion to discuss with your real estate attorney about this and say “hey, I’m really curious what difference it’ll make for me if I close at the beginning or end of the month.” We can help figure that out for you so that you can decide whether or not you’d like to have a little bit more time before your fist mortgage payment is due or if you want to minimize the amount of money that you need to bring to closing.
I hope that this information has been helpful for you.
I can be of any help please don’t hesitate to reach out through my contact form or call using my contact information in the footer!
Cheryl A Morrison
Real Estate Attorney