What is the "Prepaid Finance Charge"?
Prepaid finance charge is when you close on your loan before the first of the month. You would prepay interest, calculated at your new interest rate divided by 365 times the number of days till the end of the month. This is the only time you would prepay interest. Once you close your first payment would not be due till the first on the month. If you closed on the 15th of December, you would prepay 16 days of interest then make your first payment on February 1st. You are not charged interest on your mortgage till the end of the month. then interest is added to your principle balance. This is base over 20 yrs experience in mortgage lending, i hope it is clear enough..