Interest on a mortgage loan is paid in arrears, meaning the current month's payment is paying the prior month's interest. When you close on a mortgage loan, you prepay at closing (consummation) the interest due from the date of the closing until the first day of the following month and typically will not make a mortgage payment until the first day of the next month.
For example, if you close on a new home on January 15 and pay interest at closing from January 15 through January 31, your first mortgage payment will be due on March 1. When you pay the March payment, you are paying interest due for February. It’s basically the opposite of rent; rather than paying to live in your home for the upcoming month, you’re paying for the month you just lived in it.
The principal balance on your mortgage is the balance remaining after your most recent payment was made. The payoff will include the principal balance plus any accrued interest due since that last payment was made.
As always, your Loan Officer is here to answer any further questions.