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when I refinance my home and make the frist payment what month of interest am i paying for

when I refinance my home and make the first payment what month of interest am I paying for
  • November 11 2009 - Rowlett
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Answers (4)

Another way to think about it is when you rent, you pay rent and live in the house for 1 month. When you own, you live in the house for a month first, then pay, which is why the interest is paid backwards.
  • November 11 2009
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It is a little hard to wrap your head around the payment in arrears, but say you just paid your old mortgage on October 5.  When you did, the payment included the interest for the month of September.  The balance wasn't paid off completely on October 5, and so when you re-financed and got your new loan arranged to close on October 27, the final pay-off included interest on the balance either from October 1-27 or for the whole month of October (even though it was paid 4 days before the end). 
Your new loan doesn't require a payment until December 1.  Since your new loan closed 4 days before the end of the month, it included prepaid interest for the last days of October when you closed.  You don't make a payment on your new loan in November, although it did close in October, the previous month. 
Then, your whole new loan balance would be outstanding from November 1-30.  So, the interest included in your first payment due December 1st on your re-fi would include the interest for November.  This is what is meant by arrears.  You're paying interest for the previous month. 
  • November 11 2009
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Mortgages are always 30 days behind.

  • November 11 2009
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The previous month.
  • November 11 2009
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