# Prepaid items

> Prepaid items are costs paid at closing before they’re due: daily interest to month-end, homeowners insurance and sometimes property taxes.

URL: https://mail.mortgage-math-us.com/glossary/prepaid-items/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**Prepaid items**, or prepaids, are costs you pay at closing before they come due: daily interest from the closing date to the period your first payment covers, usually the first year of homeowners insurance, and sometimes property taxes or mortgage insurance. They’re listed in section F, “Prepaids,” on page 2 of the Loan Estimate and Closing Disclosure.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| 30-year fixed average (used in the example) | 7.24% | [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) | Week of Oct 29, 2026 |
| Largest escrow cushion a servicer may hold | 2 months | [CFPB, Regulation X 1024.17](https://www.consumerfinance.gov/rules-policy/regulations/1024/17/) | Oct 28, 2026 |

## Prepaid interest, worked out

Mortgage interest is paid in arrears, so your first regular payment doesn’t cover the days between closing and the end of that month; you pay them upfront. On a $300,000 loan at 7.24%, daily interest is $59.51. Close with 15 days left in the month and prepaid interest is $893. Closing later in the month shrinks this line because you borrow for fewer days; your regular payments stay the same.

## Prepaids vs. the escrow deposit

Section F pays bills themselves, such as the insurance premium. Section G, the initial escrow payment, is a separate deposit that starts your [escrow account](https://mail.mortgage-math-us.com/glossary/escrow-account/) so the servicer can pay future [property tax](https://mail.mortgage-math-us.com/glossary/property-tax/) and insurance bills; it can include a cushion of up to 2 months of escrow payments.

Neither has a tolerance limit. The CFPB lists prepaid interest, property insurance premiums and initial escrow deposits among the costs that can change by any amount before closing, since they depend on your closing date, insurance quote and tax bill. Estimate them with the [closing cost calculator](https://mail.mortgage-math-us.com/tools/closing-cost-calculator/).

## Related terms

- [Closing costs](https://mail.mortgage-math-us.com/glossary/closing-costs/) and [homeowners insurance](https://mail.mortgage-math-us.com/glossary/homeowners-insurance/)

## Sources

- [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- [CFPB, Regulation X 1024.17](https://www.consumerfinance.gov/rules-policy/regulations/1024/17/) — Most an escrow account may hold as a cushion (one-sixth of annual escrow payments) (Oct 28, 2026)
- [CFPB: What are prepaid interest charges?](https://www.consumerfinance.gov/ask-cfpb/what-are-prepaid-interest-charges-en-161/)
- [CFPB: Can my final mortgage costs increase from what was on my Loan Estimate?](https://www.consumerfinance.gov/ask-cfpb/can-my-final-mortgage-costs-increase-from-what-was-on-my-loan-estimate-en-172/)

_General information, not financial advice._