When is mortgage interest typically paid in relation to closing?

Mortgage interest is typically paid in arrears, meaning that the payment for the interest accrues over time and is paid after the time period in which it was incurred. This is standard practice in the real estate and lending industry. For example, if a borrower closes on a mortgage loan on any given day of the month, the first mortgage payment is generally not due until the following month, covering the interest accrued during the preceding month.

This structure allows borrowers to occupy and utilize the property before requiring their first payment. Interest payment in arrears aligns with how interest on many types of loans, including mortgages, is calculated. Thus, understanding that mortgage interest is associated with the period that has already been completed reinforces the logic behind the payment schedule. The options that imply payments at the start of the mortgage, in advance, or immediately after closing do not align with this fundamental practice in the mortgage industry.