Question:
What is prepaid interest for and how does the closing date effect the amount?
Mary A.
Wyandotte, Michigan
Answer:
The lender starts charging mortgage interest from the day the loan funds. If your loan closes on the 15th of the month, they will collect interest from the 15th till the end of the month, so you will have to pay 15 days of prepaid interest. Keep in mind, when you make your monthly payment you are paying interest for the previous month. For example, when you pay your payment for the May 1 payment you will be paying interest for the month of April. Try this interest only mortgage calculator and calculate your payments.
Elsewhere…
— Interest Only Mortgage Calculator
— FRB: Interest Only Mortgage