Is the first mortgage payment a double payment?
August 9th, 2009 by Lenny
I am hopefully completing on my first property next Friday. How does the first mortgage payment work? Will it be a double payment?
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No.
On your mortgage, you always pay interest in arrears. This is part of the reason that you end up paying so much money over the life of your loan.
If you carefully review the HUD-1 Form that you received from the Escrow Company (Closing Statement), you will see that you were charged interest from the day of closing through the end of the month. Since your first payment won’t be until after the next month, it includes interest for the prior month.
So, if you close in March, your HUD-1 includes interest through March 31. You have no payment to make in April. Your May 1 payment includes the April interest. What many people don’t realize is that your mortgage company will probably accrue interest beyond the first, until the day they receive your check. This is common practice, but it really is a violation of the terms of your mortgage. Good luck enforcing this one later.
So, the answer to your question is no, the first payment is not a double payment, but you are welcome to pay extra each month as additional payments to principal. If you choose to do this, be sure to include a letter explaining that you want the excess applied to additional principal, or else the mortgage company will simply consider that a prepayment of the next month’s payment. This means you won’t get an interest credit, if you don’t tell them your intentions.
Good luck, and enjoy your new home!