Paying Interest on Mortgages: Mortgage Interest is always paid “in arrears” with one exception. “In arrears” means that the current payment always covers interest accrued during the previous month.
Hence, a payment due May 1st will pay interest accrued in April; a June 1st payment will cover interest accrued in May, and so on.
The exception is the month in which a loan or purchase transaction closes. Interest is always paid forward during the month a loan closes. Hence, if a loan closes on April 15th, the borrower will pre-pay about 15 days interest through the end of April.
The borrower closing on April 15th will then have NO “May payment” because he is pre-paying all of his April interest at close. The borrower is not “skipping a payment”; he is merely paying his May payment (April’s interest) early or at close.
A borrower closing in April will have his first payment due on June 1st (to cover the interest accrued in May).
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