< Back to JVM's Blog

Accrued Interest and Mortgage Payment Myths

We had a seller recently who insisted on closing by month-end b/c he could “not afford another payment” on his mortgage. B/c we inherited the deal from another lender 7 days before month-end, we were not able to comply with the seller’s request.

The seller was utterly confused, however. Interest was accruing against his mortgage at the same rate no matter the closing date. In addition, he was on the hook for all of the principal no matter the closing date.

The only affect closing into the new month had on the seller was a few more days of accrued interest. He was not on the hook for another full payment (that would have been avoided if we closed earlier). If he had made the additional payment, his pay-off demand in his escrow would have just been smaller by 30 days of interest and some principal, and he would have netted more from his sale.

Interest accrues in arrears against mortgages, and it is due at the same rate no matter what day during the month a transaction closes. More on this next week.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646