To Save Money, Close Escrow Late in Month

Q: I recall that you once mentioned the best day of the month to close a home purchase to keep closing costs down, but I forgot it. My son is buying a townhouse. What day of the month should he close the purchase?

A: The best day of the month to close a home purchase is the last business day; however, if the last business day of the month falls on a Monday or the day after a holiday, close on the previous business day. Avoid closing on a Monday because most lenders will charge interest from the previous Friday, even though the new owner does not yet have possession of the home.

Mortgage interest is collected in arrears, so by closing on the last or next to last business day of the month, the buyer has to pay interest at closing for only a day or two. However, if the closing is at the beginning of the month, the borrower must pay interest at closing for the entire month.

Robert J. Bruss is a syndicated columnist, as well as a real estate investor, lawyer, broker and educator in the San Francisco Bay Area.