For new homeowners, the timing of your first mortgage payment after closing is important. You may need to manage cash flow carefully in the months after shelling out substantial sums for the down payment, closing costs and moving expenses. This is especially true if you’re also paying for renovations, new furniture or other large expenditures related to your new home.
When is my first mortgage payment due?
Naturally, homebuyers often have questions regarding their new mortgage, namely, when do mortgage payments start and when is the first mortgage payment due? The due date for your initial mortgage payment depends on the closing date, and it’s usually more than 30 days away. Typically, you can estimate it by adding a month to the closing date, then figure your payment will be due on the first day of the following month.
For example, if you close on your mortgage on March 12, your first payment would be due on May 1. After that, you’d owe a mortgage payment on the first of each month.
You can find the due date for your initial payment among the documents you received at closing. Look for a letter titled “First Payment Letter” that contains the details you’ll need to make the payment.
Choosing your closing date based on your goals
When scheduling the closing on your house, keep in mind that the earlier in the month you close, the longer a time period you’ll have to replenish cash before making the first payment.
On the other hand, scheduling your closing for later in the month means you’d pay less prepaid interest — that’s the interest that accrues in the period between your closing date and when your first mortgage payment is due.
When Ben Simiskey, a certified financial planner at Stegent Equity Advisors in Houston, bought a house recently, he considered how prepaid interest would impact his cash flow when scheduling the closing.
“I wanted to be able to preserve some cash for projects after I moved in, so I was mindful of how much cash was due at closing and when my first payment would be on my new mortgage,” says Simiskey.
He chose a date later in the month to minimize his prepaid interest due at closing.
“By closing on July 24, I only had to prepay seven days of interest,” says Simiskey. “If I had closed earlier in the month, it would’ve been more.”
What goes into your mortgage payment
Your mortgage payment includes the loan principal, interest and other items that the mortgage lender or servicer deposits into an escrow account, like taxes and homeowners insurance. The acronym PITI stands for these main components of your mortgage payment: principal, interest, taxes and insurance.
|Principal||This is the borrowed amount you need to pay back.|
|Interest||This is the amount the lender charges for lending you the money.|
|Taxes||These are property taxes you pay based on the assessed value of your home. You can find information on what you owe on your county assessor’s website. Your payment may go into an escrow account until due.|
|Insurance||Premiums for your first year of homeowners insurance may be included in your closing costs. After that, your monthly mortgage payment may include a portion of your homeowners insurance premium that goes into the escrow account until it comes due.|
If you have to pay mortgage insurance, that premium will be included in your mortgage payment, as well.
Calculating your PITI payment can help you understand how much house you can afford, more than just considering the principal and interest amount. By adding tax and insurance into your budget, you’ll be closer to pinpointing a loan amount a lender may approve.
How to make your mortgage payments
You can choose one of many methods to pay your mortgage:
- Auto-pay. Setting up recurring ACH payments from your checking or savings account is an easy way to make mortgage payments automatically. Depending on your goals, you can split the monthly payment into two to save on mortgage interest, pay more each month to pay off your mortgage early, or sync payments with your paychecks to avoid overdrafts.
- Online. Making payments on your lender’s portal or app is fast and reliable. What’s more, if your mortgage loan is through the same institution you bank with, scheduling payments should be a very smooth process. If you plan to pay off your house sooner, paying online can be a convenient way to make extra principal payments when you have spare cash to put towards an early payoff.
- By mail. If you don’t have access to a computer, you can send your monthly payment by mail using a personal check, cashier’s check or money order. Always include your mortgage account number on your check and allow enough time for delivery to avoid late charges.
- By phone. Making a mortgage payment over the phone can be convenient, especially if you’re close to the due date and want to avoid incurring a late fee. Call the number on your mortgage statement and be ready to give the customer agent your mortgage account number and banking account information. Remember to ask the agent if there is a service charge for phone payments. Generally, phone payments are credited to your account quickly.
If you want to split payments or prepay your mortgage extra payments, ask your lender which if they are permitted and how payments are applied. For example, if you want to make bi-weekly payments, ask your lender if they charge a set up fee, transaction fee or a prepayment penalty. Also bear in mind, some lenders only apply your payments once a month even if you’re submitting two or more payments each month, which could negate any benefits you’re seeking.
Late mortgage payment grace period
If you’ll be late making your mortgage payment, you typically have about 15 days from your payment due date as a grace period, though this varies from lender to lender. As long as you make your payment within that time, you won’t incur a penalty.
However, making a payment more than 30 days past the due date will not only earn you a late fee — which could be 3 percent to 6 percent of your payment amount — it can also harm your credit. When your lender reports a late mortgage payment to the credit reporting agencies, it stays in your credit file for seven years.
Missing even a single mortgage payment can hurt your credit score, while a pattern of missed payments would damage it substantially. Keep in mind, payment history is the most influential credit scoring factor, accounting for 35 percent of your FICO credit score.
If you’re struggling to make your mortgage payments, don’t delay contacting your lender about it. While nothing is guaranteed, your lender may waive late fees or agree not to notify the credit bureaus of a late payment if you make them aware of your situation. There’s also a chance you may qualify for a loan modification, repayment plan or a temporary reduction of payments.
When you take out a mortgage to buy a home or refinance your existing home, your first payment will usually be due on the first of the month, one month (30 days) after your closing date. While it may seem like you’re skipping a payment, you’re not. That’s because mortgage payments are paid in arrears. In other words, your payments are for the previous month, not the current month.
Purchasing a home is one of the most significant financial decisions you’ll make. Managing your payments successfully by making your payments on time each month is critical to avoid damaging your credit or, even worse, losing your home to foreclosure. To that end, set up automatic payments with your lender or set reminders on your mobile device, so you don’t forget a due date or miss a payment. It’s also wise to keep an emergency fund that can cover your mortgage payments temporarily if you face financial hardship in the future.