Nevada Real Estate >> Las Vegas Real Estate Specialist: Florida: Fort Lauderdale

Real Estate closings & your Interest Per Diem - When is the best time to close on your mortgage?

 

Will it be cheaper to close on my property at the end of the month of the beginning of the month?

 

mortgage questions that may confuse you  

How many times do we read something that may not be true?  Or that you get misinformation, just because someone thinks they know.  Can this confuse so many?  I could be here all day on this topic.

Today's topic is Interest Per Diem - It's very simple on real estate transactions. It is the interest charged to the borrower daily for that specific month until the loan closes, or on a refinance, until the loan disburses.  If you were to close on the 25th of February 2010, then you are paying daily interest until February 28th, 2010, which is 4 days of interest.

What I wanted to point out is that there are some lenders, mortgage companies, that can do what is called an interest credit. This basically negates your interest per diem.

 

 

 

This was an answer from a realtor who claims to have been a loan officer for 15 years. This info is misleading...

interest per diem

 

 

 

 

 

 

 

Depending on the lender that you are working with on your mortgage transaction, this might not necessarily be true. Here at Infinity Home Mortgage Company, I can offer you an interest credit.  It doesn't matter if you are doing a FHA loan, a conventional loan, a VA loan, or a USDA loan. We can offer such a credit up until the 5th day of the month. How does this work?

This example will be based on a loan amount is $200,000 with a interest rate of 5.00%. Your daily interest charge would be $27.40 a day. If you closed on the 25th of February, you would pay interest for 4 days, up until February 28th.  This total charge would be about $109.59 to you at closing. And your mortgage payment would be due April 1st.

Now, if you were to close on March 4th, you would be charged no interest at all. We actually credit back the interest to you on the sheet, so that you will not pay anything extra. Keep in mind though, your first mortgage payment would still be due on April 1st.

 

 

 

ConclusionMany of you have been told that it's best to close at the end of the month, because this would be cheaper. In theory, this is true, but as you can see, it still wouldn't cost you anything extra if you closed by the 5th of the month. Now, some lenders are different and might extend this to the 7th or so.  And some may not offer this at all.  Why can this help you?  If your purchase transaction has been postponed for numerous reasons, this could save you a lot of money.  If the lender wouldn't do an 'inerest credit', then you could be charged 27 days of interest on the example that I used above.  That could be an additional $739.80 that you would have to bring to your closing.

One thing to keep in mind.... closing your loan at the beginning of the month might not always benefit the seller though.  It all depends on the type of mortgage that they have or the restrictions associated with that loan.  Example : On FHA loans, you are always 2 months in the arrears and if that seller has an FHA mortgage, it could cost them a lot more money to close on the 5th than it would on the 25th. Just food for thought...

 

 

 

Interest Per Diem Reminder :  Just keep in mind that if your loan officer doesn’t bring this up to you, that you should ask them about it.  Especially if something were to delay your closing into the next month, it could cost you thousands of dollars more upfront.

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

HUD

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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follow Jeff Belonger on Twitter

 

The FHA Expert's fan page on Facebook     Add Jeff Belonger to your network @ LinkedIN

                                                                            FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

Mortgage Myth Busters

 

______________________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

HUD

 

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comment balloon 8 commentsJeff Belonger • February 17 2010 10:43AM
Real Estate closings & your Interest Per Diem - When is the best…
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Will it be cheaper to close on my property at the end of the month of the beginning of the month? How many times do we read something that may not be true? Or that you get misinformation, just because someone thinks… more