When Is the Best Time of the Month to Close?

There really is no best time to close, and if you are purchasing a home rather than refinancing one, the closing date will have to be worked out with the seller, and they normally get preference, as they may be timing the transaction with you to coincide with another transaction or activity, such as buying the next house they’re moving into.

The day of the month you close will, though, impact how much money you will need to take to closing. If you close earlier in the month, you’ll generally need more money to close the deal than you will at the end of the month.

This is largely because of mortgage interest costs. Let’s take a simple example. If the interest you pay on your mortgage, at least initially, comes out to $1,000 per month and you close in the middle of the month, say, on September 15, the lender will want $500 in what is called prepaid interest.

This is to cover the interest from September 15 through September 30. Then your first payment will be due November 1.

For that November 1 payment, you’ll pay the interest (and principal) for the period of October 1 through October 31. This is called paying in arrears or paying interest for a month at the end of that month, and it is how mortgage payments work.

The other thing to consider with regard to when to close is property tax payments. Different taxing bodies, namely counties, collect taxes at different times of the year in what are called installments.

These could, for example, be collected in June and September, with half of the annual tax bill due in each installment. Certain months will require less at closing than others.

A number of factors go into deciding when is the best time to close. I would be happy to go over them with you and help you make the decision that’s best for you. I’m always here to help. You can reach me by phone and by email.