When Is the First Mortgage Payment Due

Since mortgage payments are due on the first of the month, the first mortgage payment is often scheduled on the first of the month that follows 30 days after the loan was closed. If the purchase of a new home is closed on June 14, the first mortgage payment will not be due until August 1st. 

If the due date falls on a weekend or holiday, the payment may be due on the following business day. Review your mortgage loan terms and ensure you understand when the payments are due. If you have questions, ask the lender for clarification. For a brief overview of first-time mortgage payments, from what all the payment includes, how to calculate it beforehand, how to pay it when it is due, and much more, continue reading this guide.

Calculating the First Mortgage Payment

To calculate the first mortgage payment, you need to know the loan amount, the term of the loan (the years it will take to repay the loan), and the interest rate. Here’s the formula to calculate the mortgage payment: 

Monthly payment = (Loan amount * Interest rate / 12) / (1 – (1 + Interest rate / 12)^(-Term of loan in months))

This calculation does not include taxes or insurance. You need to add those to the monthly payment.

Types of Mortgage Payments

You may encounter several types of mortgage payments when buying a home or refinancing. Common payment types include principal and interest, escrow, PMI, ARM, fixed-rate, and biweekly mortgages.

Principal and Interest

Principal and interest are the primary payments. It pays off the principal (the amount borrowed) and the interest (the added cost of borrowing). These payments are set on an amortization schedule, meaning you pay more principal and less interest over time.

Escrow

Some mortgage payments include an escrow component used to pay for property taxes, homeowners insurance, and other costs associated with owning a home.

Private Mortgage Insurance (PMI)

If you put down less than 20%, PMI might be required. This insurance protects the lender in case you default on the mortgage.

Adjustable-Rate Mortgage (ARM)

With an ARM, the interest rate can change. Mortgage payments may go up or down depending on market conditions.

Fixed-Rate Mortgage

With a fixed-rate mortgage, the interest rate stays the same for the entire term of the loan. That means the payments will be consistent from month to month.

Biweekly Mortgage

With a biweekly mortgage, half of the mortgage cost is paid every two weeks instead of making one payment per month. That can help homeowners pay their mortgage faster and save interest.

The Benefits of Making Early Mortgage Payments

The main benefits of making early payments are improving your credit score and building equity. Neither is necessary. However, the benefits raise the quality of life.

Improving Credit Score

Paying your mortgage on time or earlier improves your credit score. Payment history is a significant factor in determining a credit score, and making early payments demonstrates to creditors that you are a reliable borrower.

Equity

Early mortgage payments also build equity in your home faster. Equity is the portion of the property you own outright, which increases as you repay the mortgage and the home’s value appreciates. Building equity can provide a financial cushion and make it easier to sell the house or borrow against it.

Understanding Interest Rates and Mortgage Payments

An interest rate is what a lender charges a borrower for using assets. Interest rates are expressed as a percentage of the principal, which is the amount of money being borrowed.

Mortgage payments are the monthly payments a consumer makes to a creditor. They consist of several components: principal, interest, and applicable taxes and insurance.

The standard mortgage payment gets paid monthly, and the loan terms determine the amount. The loan terms, including the interest rate, the length of the loan term (the time over which the loan is repaid), and the down payment, all play a role in determining the mortgage payment.

A higher interest rate results in a higher mortgage, while a lower interest rate results in a lower mortgage payment. 

Making Mortgage Payments

Depending on the creditor, there are often five main options for making mortgage payments: automatic, online, phone, mail, and in-person. 

Automatic payments

Most lenders allow setting up automatic payments from a checking or savings account. Doing so ensures the payments are made on time each month and simplifies the process. Auto payments can be set up in person, on the phone, or through an online portal.

Online Payments

You may be able to make mortgage payments online through the lender’s website, which is becoming more common. Many lenders even have an app where one can manage one’s mortgage costs.

Phone Payments

Some lenders allow making payments over the phone.

Mail Payments

You can also make mortgage payments by mailing a check or money order to the creditor. Include your account number on the payment to ensure it gets credited to the correct account. Mail payments are becoming less common, so contact the lender beforehand.

In-Person Payments

You might make mortgage payments in person at a bank or other financial institution, presuming you borrowed from a local bank or creditor.

Conclusion

The first mortgage payment is often due on the first of the month after you have lived at the property for 30 days, though this can vary based on the loan. Remember, it is vital to closely evaluate your mortgage loan terms and ensure you comprehend when the payments are due. 

For more information or questions about how mortgage payments work, contact a Wesley Mortgage representative today!‍