Scheduling Your Closing

When you're negotiating the purchase or sale of a home, you'll want to give some thought to the closing date you select. Your closing date will affect the amount of funds you either bring to or receive at your closing. Remember these basic rules:

1. Although rent is paid advance, mortgage interest is paid in arrears. For example, a May 1st payment pays April's interest.

2. With one exception, interest is prorated to the day of closing. A buyer and seller pay interest on their respective loans for each day of their ownership during the month of the sale. A buyer who closes at the end of the month needs to bring less cash to a closing than a buyer who closes earlier in the month.

Here's the exception to the "prorated-to-the-day" rule: interest on FHA loans is not prorated on a daily basis when the loan is being paid off. FHA loans are prorated a month at a time. So, if you're a seller with an FHA loan, it's wise to close at the end of a month. If you have to pay for the entire month, you might as well live in the property!

3. A seller's last month's mortgage payment is often paid at closing.

The IRS allows buyers to deduct origination and discount points for the tax year of the sale. If you have the option of purchasing property at the end of one year or at the beginning of the next, consult your tax professional for advice on when to schedule the closing to your advantage.

Whether you're buying or selling property, my professional expertise will save you time and money. It would be a pleasure to be of service to you.