What is prepaid interest?
This is the interim interest that accrues on the mortgage loan from the date of the loan closing to the beginning of the period covered by the first monthly payment. For example, if your closing date is scheduled for June 15, the first mortgage payment is due August 1. The lender will calculate a per-day interest amount that is collected at the time of closing. This amount covers the interest accrued from June 15 to July 1.
This is the interim interest that accrues on the mortgage loan from the date of the loan closing to the beginning of the period covered by the first monthly payment. For example, if your closing date is scheduled for June 15, the first mortgage payment is due August 1. The lender will calculate a per-day interest amount that is collected at the time of closing. This amount covers the interest accrued from June 15 to July 1. Some lenders prohibit the collection of prepaid interest.
This is the interim interest that accrues on the mortgage loan from the date of the loan closing to the beginning of the period covered by the first monthly payment. For example, if your closing date is scheduled for April 15, the first mortgage payment is due June 1. The lender will calculate a per-day interest amount that is collected at the time of closing. This amount covers the interest accrued from April 15 to May 1 and then your June 1 payment covers interest from May 1 to June 1.
This is interim interest that accrues on the mortgage loan from the date of the settlement to the beginning of the period covered by the first monthly payment. Since interest is paid in arrears, a mortgage payment made in June actually pays for interest accrued in the month of May. Because of this, if your closing date is scheduled for June 15, the first mortgage payment is due August 1. The lender will calculate an interest amount per day that is collected at the time of closing.
