The most popular times to close on a mortgage are on Fridays and at the end of the month — even though there is not necessarily any financial advantage to borrowers in doing so.
Data posted last month by the National Association of Realtors ranked the top seven closing days in 2014 as the last business days of June, May, August, April, July, September and February. All but three of the next 18 most popular closing days were Fridays.
Together, those 25 closing days were estimated to account for a quarter of all home sale closings last year, according to the association.
Borrowers schedule closings at the end of the week or month for various reasons, practical and otherwise. If they have been renting, they may time the closing to coincide with the end of their lease, said Matt Hackett, the underwriting and operations manager at Equity Now, a direct mortgage lender in New York. And closing on a Friday gives home buyers the weekend to move.
However, Mr. Hackett said that midweek closings typically allow for a better deal from movers.
Lenders, too, have an interest in racking up closings at the end of the month, said Jordan Roth, a mortgage specialist with Guardhill Financial in New York.
“Lenders want to make their monthly numbers,” Mr. Roth said, “so they will push to get the closings in before the month rolls over.”
Frequently, however, a false assumption underlies the preference for end-of-month closings, said Michael Moskowitz, the president of Equity Now.
“People think that closing at the end of the month means they won’t pay an extra month of interest somehow,” Mr. Moskowitz said. “That is totally fallacious.”
Whether it’s a purchase or refinance loan, lenders typically require that you prepay the interest due for the remainder of the month in which you close. So it’s true that if you close on Feb. 2 instead of Feb. 28, you will be charged more at the closing table in per diem (or daily) interest.
But so long as your closing is on or near your move-in date, you’re not paying for an “extra” month’s interest. And since mortgages are paid in arrears, your first mortgage payment wouldn’t be due until April 1, to cover March.
Borrowers who need to limit their upfront cash outlay may want to roll the per diem interest cost into their loan, then close early in the month, rather than later, Mr. Roth said. That way, borrowers stretch out the span until they have to make their first payment to six weeks or more.
Closing early in the month may also give the borrower the option of taking an interest credit, which can reduce the funds needed to close, Mr. Moskowitz said.
On a Feb. 4 closing, for example, instead of paying per diem interest for the remainder of the month, the borrower would be credited for the interest due for the first few days of the month.
Because that February interest would still be due, however, the first loan payment would be due sooner — March 1, instead of April 1.
It used to be financially advantageous to close on loans backed by the Federal Housing Administration at the end of the month, Mr. Hackett said. The agency had an unusual policy requiring borrowers to pay interest for the entire month regardless of their closing date.
But because of a recent rule change, only per diem interest can be charged on Federal Housing Administration loans closed on or after Jan. 21, 2015, according to Mr. Hackett. Sellers paying off an older F.H.A. loan and borrowers refinancing out of one, however, are still better off closing at the end of the month.