Home Buying Tips: Close at the End of the Month

Buying a home could easily be the most expensive purchase you make in your life. And even after you’ve obtained the loan and budgeted for all possible costs, a lot of little expenses seem to appear out of nowhere. It would be useful to have a bit of cash on hand for such surprises. If you want to preserve your short-term cash flow, the best time to close would be on the last day of the month.

When you buy a home, you have to pay accrued mortgage interest from the time that you close until the end of the month. For example, if your mortgage runs $250,000 and your rate is 3.75 percent, you’d pay about $376 per month, or $12.53 per day, in interest.

  • If you closed on the first day of the month, you’d owe $376 in interest because you’re paying interest for every day of the month.
  • If you closed on the last day, you’d owe $12.53 in interest because you’re paying only for the last day. You’d save $363.47.

In the long run, all the interest payments balance out to the same total by the loan’s end. So don’t let these savings be the sole reason you close on a particular day. However, the extra cash could come in handy for paying deposits to utility companies, paying off movers or cleaners, or stocking the pantry. You could even add that extra pieces of furniture to the entry that you’ve always wanted.

If you want more home buying tips, or need help in looking for a place to own, please contact us.

Listing information is deemed reliable, but not guaranteed. This IDX solution is (c) Diverse Solutions 2013.
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