August 18, 2011

Should you close at the end of the month?

By Marcie Geffner - Bankrate

Conventional wisdom says home buyers should wrap up their purchase deal at the end of the month so they can pay less prepaid interest at closing. That's not a bad strategy, but like so much conventional wisdom, it's often misunderstood and not always ideal.

In fact, buyers don't save money by closing at the end of the month, says Peter Thompson, a senior loan officer at Prospect Mortgage in Naperville, Ill. Rather, a month-end close means buyers pay less prepaid interest, but skip only one subsequent monthly payment. Meanwhile, buyers who close at the start of the month pay more prepaid interest, but then skip two monthly payments. Either way, there are no interest-free days; so in effect, the difference is more about cash flow than savings.

Read on: Should you close at the end of the month?