What Is Prepaid Interest

A man wearing pink pants with crossed legs with a mobile phone on left hand 

When you are at the closing of a real estate transaction, you may hear the term “prepaid interest.”

Here is what it means: prepaid interest charges are charged at closing for any daily interest that accrues on your loan between the date you close your mortgage loan and the period covered by your first monthly mortgage payment. 

Read Also: Why Is Location Important When Buying A Home?

For example, if you close on a home in the middle of a month, you become the owner of the home. As the closing date approaches, the mortgage interest will be precharged. That is due until the last day of the month, when lenders don’t bill you for the interest due. Instead, they are included in your closing costs.

If you were to close on the last day of the month, you would owe interest for just one day since the full month’s payment would be due on the first day of the next month. The monthly interest is paid in arrears. The reason for this is the manner in which mortgage loans are amortized. 

Watch the video below:

Subscribe to our YouTube Channel for more Real Estate Free Reports

One of the reasons to call the Agardi Team if you want to buy a home or have one to sell is:

Not only do we sell our clients’ homes for more money and faster than the average area agent, but your home is also more likely to sell. According to 2015 MLS statistics, only 71% of area homes sold during their listing term. Compare that to our 95% of homes listed that sold before the end of the listing term. YOUR HOME SOLD GUARANTEED OR WE’LL BUY IT*

To discuss the sale of your home, call The Agardi Team at 718-755-2882 and start packing!

*Agardi Team and the seller have to agree on the price and the closing date.

Call Us @ 718-755-2882
%d bloggers like this: