When is the best part of the month to close on a house?

Many new homeowners work years toward their goal of buying a home. After all that time and effort, does it matter exactly when you close? It turns out that closing on a house near the end of the month instead of the start can save you several hundred or even several thousand dollars.

Key takeaways:

• Closing earlier in the month can save you hundreds or thousands of dollars in interest.
• Closing on the 1st, the 15th, a Friday, a federal holiday, or the last day of the month increases the likelihood of delays.
• Seller concessions, buying and selling a house at the same time, and personal life factors may matter more than how much you save on interest.

Why the day you close matters

The day you close affects when your first mortgage payment is due, your amortization schedule, and how much you must pay in interest and property taxes.

It may delay your first mortgage payment

Your first mortgage payment usually is due on the first of the month, 30 days after you close. This means that if you close on Feb. 4, your first payment will be due April 1, not March 1, because that’s less than 30 days after you close.

Because not all months are the same length, the month also matters. If you close on the first day of a 31-day month, such as May, your first payment will be due June 1.

It affects your loan’s amortization

Your mortgage is amortized, meaning your monthly payment is calculated to repay the principal and all accrued interest by the end of the loan term. When you start paying your mortgage, most of your payment goes toward interest, and a small amount is applied toward the principal. With each payment, you pay less interest and more principal. By the final payment, you’re paying almost all principal.

When you close on a house, you must pay the interest that will accrue on your loan before the first payment is due. This interest is rolled into your closing costs. Closing early in the month means you’ll pay more interest with your closing costs than if you close later in the month.

It affects your tax liability

Mortgage interest is tax-deductible, so how much interest you pay affects your taxes. The deduction usually is large enough that most homeowners benefit from itemizing their deductions instead of taking the standard deduction.

When you close affects how much interest you pay, which can affect how much you can deduct from taxes in the year you close and the following year.

Say you’re closing in late October and your first mortgage payment is due Dec. 1. You will have mortgage interest to deduct, but perhaps not enough to justify itemizing your deductions instead of claiming the standard deduction. However, if you put off closing until early November, your first payment will be due in the new tax year. This would minimize the amount you can deduct in the purchase year and allow you to maximize the interest you pay, which can be deducted in the following year.

If you expect to buy a house near the end of the year, pencil out which tax deductions you expect to claim this year. If you’re not planning to itemize deductions and stick with the standard deduction, pushing the closing back a few weeks may be worthwhile. On the other hand, you might want to ring in the new year in a new home.

Challenging days to close on a house

Even if something might save money, it might not always be the best option. Complications can slow down or change the closing process if it’s attempted on certain days.

The 1^st, 15^th, or last day of the month

When you close on the first of a month, you’re going to accrue interest throughout the whole month, resulting in a big payment.

Meanwhile, the end of the month can be a hectic time for lenders. That’s when they often deal with the complex cases from earlier in the month. You might save on interest if you aim to close on the 30th or 31st, but circumstances beyond your control might have you closing on the 1st instead.

If you’re feeling overwhelmed, you might be thinking about the 15th. But you’re not the only one. The 15th of any given month is reportedly the busiest day for many lenders, meaning that unless you’re at the top of their list, you may have to wait.

On or near a federal holiday

There’s no law stopping anyone from closing near or even on a federal holiday, but you’ll have to expect to wait if your closing falls near or on one. Your mortgage lender’s offices may be closed, which could delay fund distribution. As you must record your mortgage with your local government, you can expect delays in this process as well.

Because a federal holiday in a month means one less business day, there might be more closings happening immediately before or after the holiday than there would on an average day. This means you might have to wait an extra day on top of the holiday.

On a Friday

Closing on a Friday poses similar issues to closing on or near a federal holiday. Offices are unlikely to be open over the weekend, so much of the process might get pushed to Monday if anything is delayed by even an hour.

An example of the best time to close

Let’s say you’re closing on a house over the summer. You take out a $500,000 mortgage at a 4% interest rate. The per diem interest you’ll pay until you make your first mortgage payment is calculated this way:

$500,000 (cost of mortgage) x 0.04 (interest rate) / 365 (number of days in a year) = $54.79.

To find out how much interest is accrued by closing at different times of the month, multiply this daily interest amount by the number of days until your first payment.

Let’s say you close on July 1. You’ll pay $1,698, or 31 days, in interest at closing before making your first payment. However, if you close on July 30, you’ll only pay interest through the end of the month, which is two days' interest or $109.58.

Keep in mind that this only affects the initial interest you pay when closing on the house. Future payments will not be notably affected by the date that you close. Still, your total interest paid throughout the life of the loan will be slightly higher if you close early in the month.

Other considerations

While interest accrual is important, it’s not the only thing to consider when choosing a time to close on a house.

Seller concessions

If you’re closing on a house in a buyer’s market, a common seller’s concession is offering to pay some or all of the buyer’s closing costs. As the interest accrued during the month of closing is included in those costs, you might not have to worry about the date at all. Just make sure you are clear on what the seller is offering to cover before making a commitment.

Your housing situation

If you’re buying and selling a house at the same time, putting off the closing date might leave you needing accommodations if your home sells before then. Unless you have someone to stay with for free, the nightly price of a hotel might be higher than the interest you’d owe if you just closed earlier. Do the math to determine if this is worth it.

Your personal life

Life sometimes keeps from meeting an exact timeline. You might want to close on a house quickly due to a new job, the start of the school year, or a baby on the way. You might travel for work or be moving across the country, so you can’t be there to close the house when it saves you the most money, though you can ask your lender if a remote closing is an option.

And, of course, maybe the comfort of living in your own home outweighs any financial benefits of adjusting your closing date.

The bottom line: When closing on a house, choose what works for you.

At the end of the day, the best time of the month to close on a home is simply whatever works best for you. If you’re eager to save money on interest and can afford to be flexible with your closing date, aim for later in the month. If you’re working on a tight timeline due to work or the sale of your previous home, or maybe you’re just ready to move in and make the home yours, the savings on interest may not be worth it.

If you’re ready to take the next step towards homeownership, start your mortgage application today with Rocket Mortgage®.