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Wednesday, December 15, 2010

Real Estate Closings: Why close at the end of the month?

It almost always seem that I write all real state offers to close on or before the end of the month?  Why close at the end of the month?
If closing costs and the expense of closing are not a real issue then it makes no difference when one closes.   If, on the other hand, a buyer needs to minimize current out of pocket money to close, then an end of the month date makes sense.

At closing, regardless of what day of the month, the buyer is assessed “pre-paid interest” for the remainder of the current month because interest starts on the day the loan is closed.

If the interest on the loan (for example, $3,000 a month for easy math 3000/30 days=100)  is going to result in a $100 per day interest charge, then a closing with two days left in the month results in a $200 pre-paid interest charge at closing.  If it is the 10th of the month with 20 days remaining in the month, then the charge will be $2,000.

Also, buyers should keep in mind the day of the month one closes will influence when the first payment will be due.  If money for closing is tight, discuss the closing costs including pre-paid interest charges with your lender.

I am a real estate agent - not a mortgage broker.  Please contact your lender regarding mortgage information.

 If you are in the Brevard County, Florida area and would like the names of a few mortgage contacts, please email me. 

And when you are ready to buy that Brevard County Florida home, let me help you!

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