Costs & Fees
What are prepaid items and escrow deposits at closing?
Updated Jul 1, 2026
The short answer
Prepaids are amounts you pay in advance at closing to fund your first insurance premium, per-diem interest between closing and your first payment, and an initial deposit into your escrow account for future taxes and insurance. Unlike lender fees, prepaids are not a charge for a service — they are your own future expenses collected early, so they are not directly negotiable.
Key points
- Include prepaid interest, first-year insurance, and escrow deposits.
- They are your future costs paid early, not service fees.
- Not negotiable the way lender fees are.
- Listed separately from closing costs on the Loan Estimate.
Why prepaids vary by closing date
Per-diem interest depends on how many days remain in the month after closing, so closing near month-end reduces prepaid interest. This is a small but real way the timing of your closing affects cash to close.
Sources
Every claim above traces to a public government source.