Mortgages can be a big expense in your monthly budget. But one woman says that the day you close on a house can make a huge difference to the amount you end up owing for your first mortgage payment.
A self-styled lifestyle and finance guru named Kristy (@asap.kristy) posted a video to her TikTok account explaining the pro tip. It received over 228,000 views.
“Why did no one tell me that the day you close on a home matters? … Thank God my closing date was at the end of the month, but that was by luck,” she exclaims.
She then goes on to explain why people benefit from having closing date closer to the end of the month.
“When you purchase a home, you get a closing date. If that closing date is at the beginning of the month, say for example Jan. 4, your first mortgage payment will not be until March 1. That means you get a longer period to pay off that first mortgage,” she says.
However, while having a longer period to make the first payment may seem like a good idea, Kristy explains why it’s actually not a financially smart move to make.
While you may have more time to make the first payment, Kristy says, that comes “at the cost of interest racking up every single day leading up to that.”
To avoid this, Kristy suggests purchasing a home at the end of the month instead.
“If you purchase a home at the end of the month, say for example Jan. 28, you’re gonna still have your first mortgage payment be March 1. However, you’re paying less in interest because from Jan. 28 to Jan. 31, you’re only paying three days of interest for that month, and then for the whole month of February. That interest will be combined with your mortgage, which is what you’ll pay off March 1.”
In conclusion, Kristy says the trade off is that you have to make your first mortgage payment sooner, but you end up owing your lender less money since the interest hasn’t had as many days to accumulate.
But is the TikToker’s advice sound?
According to Rocket Mortgage, closing at the end of the month has its clear advantages. Usually, buyers that have a new mortgage have to pay all the interest due from the official date of closing to the end of the month as part of their closing costs. So, if a buyer were to close on Jan. 28, as Kristy suggests, they would pay three days of interest at closing. And then they would pay February’s interest at the beginning of March, when their first mortgage payment is due.
Since buyers are still paying interest for all the days you own the house, closing on an earlier date in January would only increase the number of days they end up paying interest for. But there can be some advantages to closing earlier in the month. Some buyers may need more time between paying closing costs and making their first mortgage payment. There are also less scheduling difficulties at the beginning of the month and less of a risk of making errors.
Viewers weigh in
Viewers shared their thoughts about Kristy’s advice in the comments.
“I’ve gone through the home buying process twice and everything is still confusing sometimes people are lucky to have all the info you give,” one appreciative viewer wrote.
“Your guys realtor doesnt care about you if they didn’t let you know this,” said another.
@asap.kristy THE DAY THAT YOU CHOOSE TO CLOSE ON A HOME MATTERS #fyp #foryou #viral #homebuying #home #finance #personalfinance #moneytips ♬ original sound – Kristy
Some shared their own tips.
“Also the day of the week might matter! We closed on a Friday and it was a huge stress if all paper work was filed with county before they closed which was early Fridays,” said a user.
However, some people disagreed on the importance of the closing date.
“It doesn’t matter much in the long run… don’t sweat it,” claimed one person, although they did not offer any further explanation.
“It really does not matter in the grand scheme of things. You can take a smaller mortgage and pay less interest or shorter repayment and pay way less interest,” echoed another user.
“This situation is helpful on a case by case basis. Some buyers like having their first payment a month later,” another pointed out.
The Daily Dot reached out to Kristy via email for further comment.
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