What Are Prepaid Interest

brown notebook with prepaid interest in white letters with a calculator and a pen

When you are at the closing of a real estate transaction, you may hear the term “prepaid interest.” Here’s what it means:

Prepaid interest charges are charges due at closing for any daily interest that accrues on your loan between the date you close on your mortgage loan and the period covered by your first monthly mortgage payment.

For example, if you close on a home in the middle of a month, you become the owner of the home. The closing date will be precharged for the mortgage interest that is due until the last day of the month.

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Lenders don’t bill you for the interest due; instead, they include it in your closing costs. If you were closing 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.

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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
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