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It’s best to close toward the end of the month so you won’t have to pay as much interest on . However, if you do close early in the month, don’t fret: You’ll have more time to establish cash flow. That said, sometimes there are factors out of your control. “Closing times may vary by product type, lender capacity and underwriting conditions,” says Julienne Joseph, a deputy assistant secretary with the U.S. Department of Housing and Urban Development. “For instance, “closings can range from 30 days to a year in cases of new construction.” Advantages of closing at the end of the month
Your closing costs will be lower
The clear benefit of closing later in the month is that you won’t need to bring as much cash to closing. That’s because mortgage interest through the last day of the month. So, with an end-of-month closing, there’ll only be a small window for interest to accrue, and less for you to pay. You ll start paying down your balance sooner
Closing later in the month also means you’ll start making mortgage payments sooner, which will give you a small head start on paying down the balance. In other words, not only will you pay less upfront interest, but you can apply those savings toward building equity in your new home right away. Disadvantages of closing at the end of the month
Your first mortgage payment will be due earlier
Your first fully amortized mortgage payment is following the 30-day period after your closing date. So, if you close at the end of the month, you’ll have to start making mortgage payments sooner than if you had closed at the beginning of the month. “Costs of the actual transaction do not financially favor the end of the month,” explains Rocke Andrews, a mortgage broker based in Arizona and past president of the National Association of Mortgage Brokers. “You may have less prepaid interest until the end of the month, but your next payment is that much sooner.” You could face end-of-month gridlock
If you’re thinking about closing at the end of the month, know that other borrowers might have the same idea. This higher volume can create a bottleneck for mortgage and title companies. Any delays could bump your closing to the beginning of the next month —the higher-interest scenario you may have been trying to avoid in the first place. Making matters worse is that the end of the month is usually packed with closings for foreclosure and short sales, because lender timetables dictate that these closings take place at month-end. “The last week of the month is always the busiest, and mistakes and delays can occur,” Andrews says. “If possible, I recommend closing outside of that window.” What is the worst day to close on a house
In most cases, you’ll be able to close any day of the week. If there is a day to avoid if you can, however, try not to close on a Friday. Fridays tend to be the busiest days for brokerage firms and title companies, which means if any issues or errors come up during the process, you’ll have to wait the whole weekend before they can be addressed. Closing date examples
When it comes to choosing a closing date, consider what you need or prefer: lower closing costs, or a little extra time before your first mortgage payment kicks in? Beginning of the month
Remember that an early-month closing gives you more time before your first mortgage payment is due, but you’ll also pay almost an entire month’s worth in prepaid interest, as interest accrues from the date of closing through the last day of the month. That means you’ll have to bring more cash to the closing. If you close on June 1, for example, you’ll have nearly two months before your first mortgage becomes due Aug. 1, but you’ll have to pay prorated interest for almost the entire month of June at closing. Middle of the month
A mid-month closing gives you about a month and a half before you have to pay your first mortgage bill, and you’ll owe about a half-month’s worth of prepaid interest at closing. So, if you set your closing date for June 15, you’ll owe prepaid interest for only the second half of June, and have about a month and a half before your first mortgage payment is due Aug. 1. End of the month
Closing at the end of the month costs you the lowest amount of prepaid interest, but also gives you the least amount of wiggle room in terms of extra time before you have to make your first mortgage payment. With a June 30 closing, you’ll owe interest only for the last day of the month, but you’ll have just one month before your mortgage is due on Aug. 1. Closing at the end of the year
Tax breaks are among the perks of homeownership. You can file , property taxes, and you pay to your lender. If you want to take advantage of those write-offs on your next tax return, you’ll want to make sure your closing takes place before the end of the year. Note that these benefits are still available to you if your mortgage closes on or after Jan. 1; you’ll just have to hold off on filing for these deductions until the following calendar year when you do your taxes. The upshot is that you might get a bigger return if you’re willing to wait until after the new year to do your closing. “Borrowers who close at the beginning of the year are in a better position to claim more in interest paid on their mortgage than borrowers who close later in the year,” Joseph says. “Borrowers should always consult with a tax professional to determine eligibility.” How to choose the best closing day for you
1 Are you purchasing or refinancing
If you’re , your closing date likely won’t matter unless you have to and need your end-of-month paycheck. “In that case, you can always go to the first week of the month,” Andrews says. 2 How much do you have available for closing costs
Evaluate how much cash you have on hand for closing costs versus how much is needed. If you’re short, or the cost is otherwise prohibitive, it might make sense to schedule your closing toward the end of the month to avoid paying more in interest upfront. 3 Do you want to pay sooner or later
Understand the due date for your first mortgage payment — the first of the month following the 30-day period after your closing date — and decide whether you need more time before it kicks in. 4 Are you starting a new job
If you’re relocating for a new job, Fannie Mae guidelines allow you to use income from your new place of employment to qualify for a mortgage. The first day of your new job just needs to be no earlier than 30 days before your closing date, and no later than 90 days after closing. 5 Is your home in an HOA
The timing of your closing date could result in additional . Generally, if you close past a certain point in the month, you might owe another month of fees. 6 When is your move scheduled
Consider when you’ll move out of your current residence and choose a closing date that coincides with when you’re ready to move in or start making repairs. If you’re moving out of a rental property, consider whether you’ve already paid rent for the entire month. 7 When are your utilities going to be turned on
You’ll want to have power and water running when you’re ready to move in, so make sure your utility companies will be able to turn on these services at your new home right around your closing date. 8 Is it a Friday or a holiday
If you’re closing on a Friday or before a holiday weekend, know that those working on your closing might be in a rush to finish, and ultimately more prone to making mistakes. In a similar vein, you should also avoid scheduling out-of-town trips or vacations during a transaction or soon after the target closing date. 9 What are the seller s needs
If the seller you’re purchasing from is buying another home, they might not want to schedule simultaneous closings. They also may want to close before the next property tax installment or homeowners insurance premium is due. SHARE: Autumn Cafiero Giusti is an award-winning journalist with over two decades of professional experience. She writes about mortgages, real estate and banking. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. John Stearns, CMC, CRMS is a Senior Mortgage Loan Originator with American Fidelity Mortgage. Related Articles