When you close on a mortgage loan to purchase a home, you likely will not have to make your first mortgage payment right away. Most lenders provide a grace period between when you close on the loan and when your first payment is due. This grace period allows you time to move into the home and get settled before having to start making payments.
What is a mortgage closing?
Closing is the final step in the home buying process. It is when you sign all the final paperwork and documents for the mortgage loan and officially take ownership of the home.
At closing, you will sign the mortgage note and the mortgage or deed of trust. The mortgage note is your promise to repay the loan. The mortgage or deed of trust gives the lender a lien against the home as collateral for the loan.
Closing typically takes place 30-45 days after an offer is accepted by the seller. This allows time for the buyer to complete inspections, secure financing, and take care of other due diligence items. The buyer will receive a Closing Disclosure 3 business days before the actual closing date per federal law.
When is the first mortgage payment due after closing?
Most lenders provide a grace period of 30-45 days after closing before the first mortgage payment is due.
For example, if you close on May 1st, your first payment may not be due until July 1st. This grace period allows you time to move into the new home and take care of initial expenses like utilities, furnishings, etc.
Some lenders may provide a shorter or longer grace period, so it’s important to confirm the specific timeline with your lender. Make sure you know exactly when your first payment will be due so you can budget accordingly.
Factors that influence when first payment is due
There are a few key factors that influence when your first mortgage payment will be due after closing:
- Closing date – The closing date is the date you officially take ownership and possession of the home. Your first payment will be due a certain number of days after this date, typically 30-45 days.
- Billing cycle – Most lenders have monthly billing cycles (e.g. payments are due on the 1st of each month). Your first payment will be due at the start of the first full billing cycle after closing.
- Loan terms – The specifics of your loan, outlined in the mortgage note you sign at closing, determine the grace period before first payment is due.
- Prepaid interest – If you pay prepaid interest at closing for the period between closing and first payment, this may impact when your first payment is due.
To confirm the exact date your first payment will be due, check your Closing Disclosure or speak to your loan officer. The due date should be clearly specified in your mortgage loan paperwork.
Prepaying interest at closing
One key factor that may impact when your first mortgage payment is due is whether you prepay any interest at closing.
There are two main options for covering interest between closing and your first payment:
- Pay interest at closing – You can prepay the interest that accrues during the grace period by bringing those funds to closing. This is known as “prepaid interest.”
- Pay interest later – Rather than prepaying interest, you can simply have it added to your loan balance. Your first regular mortgage payment will then cover the interest for the grace period.
If you prepay interest at closing, your first payment may be due sooner because the interest for that period is already covered. If you do not prepay, your payment may be due a little further out since that interest gets added to your balance.
For example:
- Close May 1st, prepay 45 days of interest at closing – First payment may be due July 1st
- Close May 1st, do not prepay interest – First payment may be due August 1st
Talk to your lender to understand your options for covering interest between closing and first payment. Prepaying interest may save you a little on total interest paid over the loan.
Setting up your mortgage payments
Once you know the due date for your first mortgage payment, you can set up your payment method accordingly. There are a few ways to make mortgage payments:
- Auto-draft from bank account – This automatically withdraws the payment from your checking account each month. Easy set-up.
- Online bill pay – Make one-time or recurring payments through your bank’s online bill pay system.
- Mail – You can mail a check or money order each month payable to the mortgage servicer.
- Over the phone – Some servicers allow you to pay by phone with a debit card or bank account.
Auto-draft is often the most convenient and guarantees your payment will never be late. Make sure to schedule your auto-drafts or recurring payments to start on the first payment due date. Double check amounts and account numbers.
Be sure to have funds readily available in your account to cover your first few mortgage payments. It may take a couple months to adjust to the new recurring payment.
Avoid missing first payment
It’s extremely important to avoid missing your very first mortgage payment. A missed payment can result in late fees and negative credit reporting. Follow these tips:
- Know exactly when first payment is due and mark it on your calendar.
- Set payment reminders/alerts leading up to due date.
- Make sure you have funds available to cover amount due.
- Set up auto-draft payments to avoid any slip-ups.
- Contact lender immediately if you think you may miss payment due to hardship.
Grace period for delays at closing
In some cases, the closing may be delayed past the originally scheduled closing date. Common reasons for delays include:
- Appraisal taking longer than expected
- Documentation issues slowing down underwriting
- Problems with the property found during inspection
- Seller difficulties causing contract breaches
If closing is delayed for reasons outside of your control as the buyer, most lenders will maintain the same grace period after the new closing date before your first payment is due.
For example, if closing was originally scheduled for May 1st but gets pushed back to May 15th due to appraisal delays, your first payment may now be due August 1st (assuming a 75 day grace period).
The lender wants to provide you with the same standard grace period to move in and prepare for payments after taking ownership, even if closing was delayed. Check with your loan officer on how postponements may impact your first payment due date.
Being prepared for your first mortgage payment
Owning a home comes with many new financial responsibilities. To ensure you don’t start off on the wrong foot, be prepared for your first mortgage payment by:
- Knowing exactly when payment is due
- Setting payment reminders and alerts
- Automating payments from your bank to avoid mistakes
- Having funds set aside specifically to cover your first 2-3 months
- Creating a budget that includes new recurring costs like mortgage, taxes, insurance
- Reaching out early to your lender if you anticipate any hardship in making the first payment
Proper planning and preparation will help you smoothly transition into your new monthly mortgage payment responsibility.
What happens if you miss your first payment?
Missing your very first mortgage payment can damage your credit and lead to additional fees and penalties in some cases. Potential consequences include:
- Late fees – The lender will charge a late fee, often around 5% of the monthly payment.
- Lower credit score – A 30-day late payment could drop your score by over 100 points.
- Negative credit reporting – The delinquency will show on your credit reports.
- Default – Missing payments could put you in default eventually, allowing the lender to foreclose.
To avoid these outcomes, do whatever is necessary to make the first payment on time, even if that means borrowing money temporarily from family or friends. Communicate proactively with your lender if you are struggling – they may offer assistance or alternative repayment plans. Getting behind immediately on your new mortgage can start you down a path of financial hardship, so diligently prioritize that first payment.
Special circumstances for first payment
In certain unique cases, your first mortgage payment may be due later or earlier than the standard grace period:
Buying a ‘new’ newly built home
If you are purchasing a newly constructed home direct from the builder, your first payment may not be due until 30-60 days after construction is complete. Most lenders provide a longer grace period in this scenario since you cannot move in or occupy the property until after construction.
Refinancing an existing mortgage
When you refinance your mortgage, the new loan pays off and replaces your prior mortgage. In this case, your first payment on the refinance loan is often due the very next month after closing, with no extended grace period. This is because you already occupy the home and have an existing housing budget.
Buying a home ‘as-is’
If you purchase a home in its existing condition (‘as-is’) and do not need to wait for repairs, some lenders may impose a shorter grace period of only 15-30 days before the first payment is due. Make sure to confirm timing with your loan officer.
Unless specified, you can expect your first mortgage payment to be due 30-45 days after the closing date. This standard grace period gives you a chance to move in, unpack, and get settled before beginning payments on your new home loan. Be sure to proactively budget, set reminders, and prepare for this major new recurring expense each month.
Conclusion
The first mortgage payment after closing on a home purchase is typically due 30-45 days later. This grace period allows you time to move in and get situated before payments start. Know your exact due date and set up auto-drafts to avoid any missed payments, late fees or credit impacts. With proper planning and preparation, you can smoothly transition into your new monthly housing expense budget. A mortgage is a long-term commitment, so starting off on time helps set the stage for responsible homeownership.
