Re: 7-plex - questioning rude responses - Posted by JPiper
Posted by JPiper on December 28, 2000 at 14:41:19:
Without the benefit of seeing the response you received I would say that it’s possible you received poor information.
Interest is ALWAYS charged in arrears. When you close on the 2nd of the month, I could see a lender handling this one of two ways. One way is that they might charge you prepaid interest for the period from the 2nd to the 30th of the month. HOWEVER if they did this, you NEXT payment would not be made UNTIL the first of the following month. In other words, if you were charged prepaid interest at closing on the 2nd of January, your NEXT payment would not be until March 1…because the March interest would cover the month of February. The point is that where you would gain by this would be in February, rather than at your closing.
However, the lender might also handle a closing on the 2nd by not charging any prepaid interest, with your first payment due on the first of February (if we’re talking about a Jan 2 closing). This payment due on the first of February would not be for a full month of interest.
I have seen lenders handle this either way. Just ask them how they intend to handle it. To avoid this situation you could close on the first of the month rather than the second. But either way, you will benefit either in the first month or the second because rent is charged in advance, interest charged in arrears.