Do We Have To Make The Last Mortgage Payment When Refinancing?
The closing agent will check with your current lender prior to settlement to get a pay-off for the existing loan. If you have a payment due on the first of the month some will tell you it should be paid.
Others in the lender community argue that it’s okay to bring the last payment to closing as long as it’s not late. This may be okay in some situations and with some lenders, but you may be more comfortable making the payment on time and in full to assure that the first lender is fully paid, that no late fees have been assessed and to be certain that no bookkeeping error results in a credit report ding.
In 2005, HUD said that when refinancing to an FHA loan “the borrower must have made all of his/her mortgage payments within the month due for the previous 12 months, i.e., no payment may have been more than 30 days late and is current for the month due.”
Mortgage interest is paid in “arrears” – in other words, a payment made April 1st is for principal and it is also for interest earned during the month of March. If closing is on April 15th additional interest will be due for use of the lender’s money during the month – but if payment was made on April 1st nothing will be “late” because payment for the additional 15 days is being made before the next due date. The settlement agent will work the numbers and take care of the pay-off.
For specifics, speak with your lender and the individual who conducts closing.
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