Mortgage Interest: Mortgage payments are set up to be due on the 1st of each month, and pay both a principal payment, as well as interest owed for the prior month. If a buyer's loan closes on 4/15, the lender will charge prepaid interest for the last 15 days of the month that the loan closes, which will appear on the buyer's closing statement. The first mortgage payment for the buyer won't be due for approx. 45 days until 6/1, since the interest for April has been prepaid at closing, and the interest for May isn't owed until the first of June, in arrears.
The seller will also receive a charge for the interest owed on the seller's current loan from the date of their last loan payment until the closing date of sale, which will appear on the seller's closing statement. The amount of interest and principal owed by the seller is received by escrow through sending a demand notice to the lender requesting loan payoff information and a per-day interest calculation so that escrow may accurately prepare the closing statement based on the exact day of closing.
Image courtesy of mtgfoundation.com
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