Prepaids
Items paid at closing for costs that will be due in the future, such as property taxes and homeowner's insurance.
Prepaids are a category on the Closing Disclosure separate from closing costs. They include the first year of homeowner's insurance, daily interest from closing through the end of the month, and an initial deposit into the escrow account for taxes and insurance.
Prepaids are not lender fees, they're future expenses being collected up front. You'd pay them either way; closing simply consolidates them into a single transaction.
Because they're not lender charges, prepaids aren't subject to the same cost-tolerance limits between the Loan Estimate and Closing Disclosure. They can adjust as the closing date moves or as accurate amounts come in from the insurance carrier and taxing authority.
Related terms
Other terms you'll see alongside Prepaids
The collection of fees and prepaid items, separate from the down payment, that a borrower pays at closing.
A lender-managed account that holds funds for property taxes and homeowner's insurance, paid in monthly with your mortgage.
An annual tax levied by local governments on real estate, based on the property's assessed value.
Property insurance that covers losses to the dwelling, personal belongings, and liability, required by mortgage lenders.
Want to apply Prepaids to your real numbers?
Get a personalized estimate in under a minute, or talk to a licensed HCMG loan officer about how this affects your specific situation.