With the exception of reverse mortgages, all mortgage products contain a credit estimate and a closing opening that summarizes the financial details of your monthly and ex ante fees. Both forms contain a section listing the various «prepaid» that you need to cover in advance: homeowner insurance premiums, property taxes and prepaid interest. While the final cost of prepaid interest depends on your credit amount and mortgage interest rate, it is usually the smallest item among your prepaid expenses. If you go through your mortgage process, taking into account both spending rates, no matter when you decide to set your completion date. This will give you the freedom to aim for a signing date much later in the month, if prepaid interest will cost you the smallest amount. While it is technically possible to reduce your prepaid fees by reducing your credit amount or interest rate, none of these factors is as easy to negotiate as the mortgage completion date. Your own prepaid interest of course varies depending on the amount of the loan and the interest rate that goes into your calculation, but a median mortgage of $200,000 at current interest rates should be about $22 per day. The exact method of calculation may vary depending on the lender chosen. For example, a lender may also set daily interest charges as a fraction of the interest payment due in the first month of your repayment plan. While the actual difference between these methods is small, it may explain slight differences between the prepaid fees mentioned in your documents and what you calculate yourself. Prepaid or intermediate interest represents the cost of borrowing over the period between the closing date of your mortgage and the date of your first payment. Most mortgage lenders charge you interest for each day from your deadline to the end of the current month, based on the agreed interest rate for your full term. The exact cost of prepaid interest for your mortgage is contained in the documents that lenders must legally provide before the deadline.
The way businesses borrow money to finance their operating costs is fundamentally different from how consumers borrow money to make purchases.