1st Payment

[James Gravitt]

After I make a sale and I get my down payment, do I pro-rate the first payment, so they all become due on the 1st?

[Jon Holdman]

Typically you would calculate the interest from the closing date, June 10 to the end of June. That amount would be due at closing. The first payment would be due August 1 and would include the first principal payment and the interest from July 1 to July 31.

You do NOT prorate the payment to get the amount due at closing. You calculate the interest. The monthly interest is the interest rate divided by 12 times the loan amount. Then, prorate that for the number of days. In this case, 21 days (10th to the 30th) out of 30.

The way this works out is that the borrower pays interest on the full loan amount from the closing date to the first payment date. In this case, June 10th to August 1. The June part is due at closing and the July part is in the August 1 payment.