How does the first payment of a mortgage work?

Your first mortgage payment will most likely happen 30 days after closing. The timing of this payment is crucial, especially if this is your first time getting a mortgage; hence, the need for proper planning. Their first mortgage payment comes with a lot of discomfort for many, especially after spending so much on down payments, moving expenses, and closing costs. 

Ideally, mortgage lenders like Tin Ly- Homespire Mortgage determine when and how the first payment is made. 

When is My First Mortgage Payment Due After Closing?

A new house means new expenses. In addition to making a down payment, you may also have to purchase furniture and home appliances and cater for moving costs. A month after, you are faced with making your first mortgage payment. As a result, it is essential to make adequate preparation for these expenses before making your down payment. 

Generally, the first mortgage payment of a borrower is due on the first of the following month after they’ve owned the house for at least 30 days. You can tell when your mortgage lender expects your first mortgage payment by counting 30 days after your closing date. Let’s assume you closed your loan on March 13. Your first mortgage payment is due on May 1.

This timing method may be somewhat tricky as you may end up having the same due date if your closing date falls later in the month. For example, If your closing date was March 21, your due date is still May 1.

How Much Does My First Mortgage Payment Cost?

The mortgage on your home is an amortized loan and will require you to pay a fixed rate throughout the lifetime of that loan. There might be a slight variation due to the policy of the mortgage company and other factors like changes in your home insurance coverage. 

The principal and the interest rate determine your monthly mortgage payment. Additional charges like taxes and Insurance may also determine the cost of your monthly payment hence the acronym PITI. 

• The principal is the exact amount you borrowed for your house, which you must pay back.
• Interest is the amount you are charged for taking a loan on your house. It is a small percentage added to your principal and is the reward of the mortgage lender.
• The taxes here refer to the property taxes you are required to pay based on the overall value of your house.
• The Insurance here is the homeowner’s insurance, usually included in your monthly mortgage payment. The first year’s homeowners insurance is included in the closing cost in some cases.

The homeowners’ taxes and insurance premiums make up your monthly mortgage payment and are paid into an escrow account. Knowing all these, you can then go ahead to calculate your first mortgage payment and that of subsequent months. 

To calculate your annual mortgage payment, take the value of the principal and multiply it by the annual interest. To get your monthly mortgage payment, divide the annual interest rate by 12 and repeat the calculations. For example, if the principal rate of your mortgage is $100,000 and your annual interest rate is 6%, your annual mortgage payment is $6000. Your monthly payment becomes $500 after dividing the interest rate by 12. 

What Happens If I Miss My Payment?

Although your mortgage payment is due on the first day of the month, you may enjoy about 15 days period of grace. So if your payment gets to the lender by the 15th of the month, it may not be considered late; hence, there are no consequences. 

 If you fail to make payment even after the days of grace, you will be subject to consequences ranging from an additional fee to being reported to the credit bureaus. The latter will have a negative impact on your credit score. 

To be on the safe side, enroll in autopay, learn about your mortgage lender’s policy on late payment and communicate with them as soon as you miss the due date.  

The first payment of your mortgage should not be much of a hassle as long as it was adequately planned for. In the case where it becomes a struggle to make subsequent mortgage payments, you can always reach out to your lender. You may be qualified for a loan modification, temporary mortgage payment reduction or even a repayment plan. If you are still confused about anything, make sure to speak with an expert.