The answer to this question depends partly on whether you are paying off an existing mortgage at the time of closing. Let’s look at an example to illustrate this process.
In our sample scenario, you are purchasing your first home, and the closing date is set for May 10. At closing, you’ll pay interest charges from that date through the end of the month (May 31). That means you’ll pay 22 days of interest at closing. Your tax assessment will also be based on this date. Thus, the nearer to the end of the month you close, the lower your out-of-pocket charges are for this closing expense.
After closing on May 10, your first mortgage payment will be due July 1. Contained in that July payment will be interest charges for the month of June. The August payment will then cover the interest charges for the month of July, and so on. Interest charges for any given month will be paid at the beginning of the following month.
If you are refinancing or paying off an existing mortgage, the date of closing is less important. If you close on the 27th of the month, you will have a lower interest expense on the new mortgage than if you close earlier in the month, but you are still going to be paying interest on the prior loan for the first 26 days of the month.
In short, you will always be paying interest charges to one lender or another. There will never be a gap when no interest is due to anyone.
Do you have additional questions about this process? Contact your mortgage professional for more information.