After your closing date, you’ll have at least 30 days before your first mortgage payment is due. Your payment will cover more than just loan principal and interest, and starting your payments early could be a good idea. Whether you start them early or on time, you have multiple payment options. This article tells you all you need to know about your first and later mortgage payments, payment options, the dangers of late payment, and related matters.
After months of searching, you’ve finally found the right house for you and your family. You’ve been through the sometimes grueling process of gaining mortgage approval, had appraisals and inspections, and acquired a thick stack of paperwork and a ton of knowledge. But you’ve finally closed! Now’s the time to start thinking about your first mortgage payment.
Making your first payment is an exciting time. You’ve probably already moved in and are busy unpacking and getting settled —maybe even putting up curtains or applying a fresh coat of paint.
But there are a few things to consider. When is your first payment due? What exactly does that payment include? And what happens if you make a late payment? Do you want to pay make your early or wait until the first of the month? And what can happen to your credit if you need to make a late payment?
That old adage states that knowledge is power, and we are here to help you gain the understanding you need for this new venture. Read on to answer the above questions and more about your first mortgage payment.
When is the first mortgage payment due?
Unlike when you rent an apartment and pay for each month upfront, mortgage payments are made in arrears. This means when you make a payment, you are actually covering for the previous month. The nice thing about that is it gives you a little breathing room between your closing date and when you have to make your first mortgage payment. Perhaps you want that time to deal with other expenses, such as moving costs or new furniture.
After your closing date, you have a minimum of 30 days before your first mortgage payment becomes due. Sometimes that might be extended up to two months depending on when your closing date is scheduled.
If you make even one extra mortgage payment every year, you’ll whittle down your loan principal and pay less interest over the life of your loan.”
For example, if your closing is scheduled for April 2, your first payment isn’t due until June 1. If your closing comes as late as April 30, your first mortgage payment is still due on June 1. In the first scenario, no, you’re not getting a free month. You will still have to prepay interest that would otherwise end up in arrears, but that amount can be rolled into your closing costs. It’s something to keep in mind when scheduling your closing date. Maybe you need that extra time, or maybe you don’t.
You might also want to consider making your first payment early if you’re interested in paying off your house sooner than 30 years. You could choose to pay a month in advance, which puts you ahead of the game right from the start. That can be a nice buffer in case of emergency, and if you make even one extra mortgage payment every year, it will also help whittle down your loan principal that much quicker. You will also pay less interest over the life of the loan.
How do I know when my first mortgage payment is due?
That will be explained to you on your closing date, but you can also figure it out yourself. It will come due on the first of the month, on the second month after you close. So if you close on February 15, say, the mortgage payment will be due April 1.
When building a house when do you start paying the mortgage?
New construction is a bit different than buying a house that already exists. Usually, you would take out a construction loan first, then get a traditional mortgage when the house was completed. After you’d closed and moved in, you would start paying the mortgage. You might also consider a construction-to-permanent loan. With this, you take out a loan to fund the construction, then that converts to a regular mortgage when the house is done.
Do you have until the 15th to pay the mortgage?
Technically, yes, but it’s not a great habit to get into. The 15 days is the grace period allowed by lenders to help borrowers who make mortgage payments a little late. After that, you’re looking at late fees and negative credit reporting. You shouldn’t try to rely on that grace period very often if you don’t have to. Relying on the grace period makes it that much easier to be really late on a payment and suffer the consequences to your credit score.
What goes into your mortgage payment?
Your monthly mortgage payment consists of much more than simply what you borrowed to buy the house. The entire amount encompasses the principal (the actual loan amount), plus interest, taxes, and insurance. You must take into account property taxes and homeowners insurance when calculating what you can afford each month. However, you may also need to factor in private mortgage insurance (PMI), which is usually required if your down payment is less than 20% of the cost of the house. You can’t own a house without paying your taxes or being insured. This is where an escrow account comes into play.
Taxes and insurance
Escrow is an account that holds the money from your mortgage payment that’s allotted for property taxes and homeowners insurance. The lender then uses this money to pay off the county or city tax collector and your insurance company when those bills come due. Most mortgage lenders require escrow, and it’s actually quite handy. It can be tricky to budget for a large expense, such as taxes, so it’s simpler to just roll all these bills together into one easy payment. It also provides an extra layer of protection for your lender.
Occasionally, borrowers will want to handle these bills by themselves. Common reasons are because they have plenty of money saved for these expenses or they don’t want the lender making interest from their money while it sits in escrow. Usually, a mortgage lender won’t allow this, but you can make a request and might receive a special dispensation.
Principal and interest
Furthermore, your mortgage payment is broken down into principal and interest payments. The lender follows what’s known as an amortization schedule which determines how much of your payment goes to interest and how much to the principal. At the beginning of your mortgage, you’re primarily paying interest with whatever is left over going toward the principal. Over the years, that ratio will become more equal until, eventually, you are paying down the principal more rapidly.
How to make your mortgage payments
Things have changed since the days bills were paid almost exclusively by mail or, sometimes, in person. It’s now much easier for you to choose a method that works for you. You may even decide to use a different method some months than others. If you normally send payments by mail, for example, but are out of town, you can pick up the phone and take care of that today.
Also know as auto-debit, this is the easiest way to handle your monthly mortgage payment without ever having to give it a second thought. This is the best option for customers who never have to worry about their bank account dipping below a certain amount and causing an overdraft. Sometimes, though, it’s just more convenient for a borrower to split the mortgage payment into two installments, and auto-pay can work for that, too. Before doing that, however, be sure to discuss this with your mortgage lender to make sure splitting your payment is acceptable.
Paying online is another convenient way to make your monthly payment. It’s also arguably the most common way to pay bills in this day and age. You can do it at any time of the month up until the date it’s actually due. And if you do it online before the due date, you can schedule it ahead of time so it’s posted on whichever day you choose. Some lenders (increasingly more these days) offer apps for your phone so you don’t even need to do it when you’re at home in front of the computer.
This method also makes it really easy to increase payments on the principal whenever you have some extra cash. If you have a surplus of money, it can be convenient to just round up the payment. If your monthly amount is, say, $1,324, you could make it an even $1,400 — or even $1,500, if you’re feeling particularly flush that month. This is a great way to pay down your principal faster, and save on interest over the life of the loan.
Similarly, you can occasionally throw some extra cash into your escrow if you are expecting an upcoming tax increase. I think we all know taxes rarely go down, so this option is seldom a terrible idea.
Maybe you aren’t comfortable making payments online or don’t have access to a computer. Paying by mail is still perfectly acceptable, and you can do this by personal check, money order, or bank check. The only thing to keep in mind is that snail mail can be a little unpredictable (especially around holidays), so plan accordingly to allow the check to get there by its due date. An overdue payment can result in hefty late fees and poor marks on your credit, so mail that check with plenty of time to spare.
Oops, you forgot to send that check last week, and now your mortgage payment is due in two days. So you need to pay by phone this month. No big deal — it’s easy and takes just a few minutes. Keep in mind, though, that the lender will likely charge you a small “convenience fee” to make a payment this way. It seems like it should be called an “inconvenience fee” since you’re apparently penalized for inconveniencing them by paying by phone. But, to date, we’re not aware of any lenders adopting the more accurate wording.
Occasionally the lender’s website is down for some reason, or maybe you’re experiencing a power outage. Either way, you can’t get online at the moment, but your mortgage payment is due today. This is also a good time to pay by phone, and if you explain your situation, they will often waive the fee under those circumstances.
What happens if you miss a payment?
Try not to do it. If you’re a little bit late, it’s not a big deal, and most lenders give you a two-week or 15-day grace period before imposing any penalties. After that, though, you’ll be charged late fees, and mortgage lenders might report you to the major credit bureaus. Keep in mind that any negative report on your credit remains for seven years. Even one late payment will affect your score, but if this becomes habitual the damage to your credit can be disastrous and impact the rest of your life.
If you are experiencing financial difficulties, talk to your loan officer right away. There might be ways to mitigate the damage to your credit by getting a temporary reduction in payments, going on a repayment plan, or arranging some type of loan modification. Also, if current mortgage interest rates have gone down, you might consider refinancing your loan.
When you and your lender agree to a mortgage repayment plan, this allows you to make up for missed mortgage payments by adding portions of the delinquent amount to upcoming monthly payments over some period of time. This will not remove the record of late payments from your credit file, but it could prevent foreclosure, which would be worse for you and your credit.If you arrange a temporary reduction of payments or have payments suspended due to a mortgage forbearance, a mortgage repayment plan may be one of your options for getting back on track.
Remember that mortgage lenders don’t want you to default on your loan, so they could be willing to work with you. Look at the COVID-19 pandemic, for example, where so many people lost their jobs, sometimes in a matter of days. Had many lenders not been willing to work with borrowers beyond what government mandated, the results for newly unemployed homeowners would have been much more disastrous. You should communicate with your lender at the earliest possible time when you think you might have an issue making your payments.
How can I learn more about the mortgage industry trends and statistics?
Read SuperMoney’s comprehensive industry study.
- Factor in property taxes and homeowners insurance when deciding what you can afford each month.
- You could have up to two months before your first payment is due. Use the time wisely.
- Communicate with your lender if you think you might be late on even one mortgage payment.
- Negative remarks on your credit report will remain for seven years.
- Think about which payment method is best for you.
View Article Sources
- 2021 Mortgage Industry Study — SuperMoney
- Avoid foreclosure — CFPB
- Best Mortgage Lenders — SuperMoney
- Consumer Relief Guide – Your Rights to Mortgage Payment Forbearance and Foreclosure Protection Under the Federal CARES Act — CFPB
- Exit your forbearance — CFPB
- Home Purchase Mortgages: Reviews & Comparisons — SuperMoney
- How Does a Repayment Plan Work? — Experian
- How to Calculate Your Monthly Mortgage Payment — SuperMoney