Best Day of Month To Close - Posted by Chuck-NY

Posted by GL - ON on June 16, 2003 at 13:07:03:

If you close on the 15th you save 15 days’ interest and lose 15 days’ rent.

If the building brings in more rent than the mortgage costs, the result is a net loss.

Seminar sharpies used to recommend this kind of thing. In practice it means practically nothing.

What does mean something is to have the mortgage payment fall on a date that is convenient for you. This helps you every month as long as you pay a mortgage.

A paper investor on this board, told a story of how he bought a note on a mobile home at a deep, deep discount. The lender wanted rid of it because it was not “performing”. In fact the borrower made every payment, it was only a few days late. But the lender’s computer only understood “pays early” and “pays late”, and “pays late” is a red flag.

The problem was that the mobile home owner was on a fixed income and his monthly check always came a few days after the loan payment was due. The investor bought the note, and changed the payment date by a few days. Problem solved, and very profitable loan for the investor.

The point is that the date of the payment can be convenient or inconvenient so you may as well make it convenient. If you can’t make your payments on time you may well be stuck for late fees, and get a bad credit rating.

Best Day of Month To Close - Posted by Chuck-NY

Posted by Chuck-NY on June 15, 2003 at 20:08:43:

My family & I are looking to buy a house (after renting for 10 years). I understand that there is a tax savings of some kind that would be beneficial to the buyer if he can choose the closing date. Is it the last day of the month?

Thanks for the help…

P.S. a few weeks ago we were told that our interest rate for a 30 year fixed would be 5.75% A few days ago I heard that the average was around 5% and the 5 year ARM was 3.???
Now I’m hearing that the Feds will be cutting another .25-.50 this week. We have already been pre-approved for a loan and plan on making an offer on a certain house July 2nd.
What an incredible time to buy a house !!!

Wednesday! - Posted by Andrew

Posted by Andrew on June 16, 2003 at 13:58:52:

Hi Chuck,

In the big scheme of things, it just doesn’t matter.

Since this will be your personal residence and I presume you’re buying because it will somehow benefit (e.g. emotionally, financially, etc.) you, then you’d probably want to close and move in ASAP.

Bill’s remark about mortgage interest is the conventional wisdom, which is predictably wrong most of the time. Yes, interest is paid in arrears and rent is paid in advance. If you’ll be better off (e.g. housing costs will decrease) when you buy, then you’d want to buy ASAP and stop renting ASAP. If you’ll be worse off, then you shouldn’t be buying in the first place.

The only time I’d prefer to close at the end of the month, when title companies are busiest due to the masses following conventional wisdom, is when I’m selling and paying off a FHA mortgage. It is my understanding that FHA mortgages are allowed to charge interest through the end of the month in which they are paid off, regardless of the actual payoff/closing date.

As GL points out, if this were an investment property then you’d also want to close ASAP. Investment properties are purchased because they provide some benefit to the buyer, like a monthly cashflow, so why not get that going right away? If you wait until the end of the month then you’ll only pay a small portion of the expenses, but you’ll receive an equally small portion of the income. Since you should be buying with a positive cashflow, more cashflow sooner is better than less cashflow later.

Just my 2 cents… keep the change!


Re: Best Day of Month To Close - Posted by Bill H

Posted by Bill H on June 15, 2003 at 23:20:22:

Normally you try to close as close to the end of the month as possible.

Reason: Interest is paid in arrears…not upfront. Therefore if you close on the 31st, then you only owe one days interest.


Re: Best Day of Month To Close - Posted by GL - ON

Posted by GL - ON on June 16, 2003 at 08:45:01:

There are lots of ninny pinny plans to save (?) a couple of bucks by closing on a certain day, but they only apply to rentals.

The important thing is, when do you get your pay check? For example, if you get paid every month on the 15th then schedule your house payment for the 20th. That gives you 5 days to get them their check. This will save you a hassle every month.

On the other hand if you get paid every Friday it doesn’t much matter when your payment comes due because your pay check will be on a different date each time. Except that if you have a lot of other bills come due in the 1st, you might want to make the house payment the 10th .

Schedule the payments to fit your own convenience and cash flow.

Re: Best Day of Month To Close - Posted by Tim Fierro (Tacoma, WA)

Posted by Tim Fierro (Tacoma, WA) on June 16, 2003 at 24:55:29:

And you can close on the 1st through the 5th of a new month when the seller is paying all closing costs and you are the buyer. :slight_smile:

Re: Best Day of Month To Close - Posted by Bill H

Posted by Bill H on June 16, 2003 at 12:48:48:


MOrtgate interest applies to all loans…not just rentals.

And: if you close on the 15th of each month and pay 15 days interest…you lose.

I guess it is not to bad if you do one or two deals per year…However: if you you 40 to 50 at say $750 to 1,000 each then you lost up to $50,000…it’s your money. Spend it any way you chose.

Good Luck,