--- title: "Prorations and Prepaids: The Math on Your Closing Statement" description: "How property taxes, HOA dues, interest and insurance are split between buyer and seller at closing, and how to check prepaid items on your settlement statement." url: "https://mcc-solutionsnj.com/notary/guides/property-tax-proration-and-prepaid-items-at-closing" --- Guide · Updated October 12, 2026 # Prorations and Prepaids: The Math on Your Closing Statement Closing statements are full of small adjustments that make sure each party pays for the days they own the home. Two ideas explain most of them: prorations and prepaids. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** A proration splits an ongoing bill by days. If the seller has paid a tax bill covering a period after closing, the buyer reimburses the seller for those days; if a bill is unpaid, the seller credits the buyer for the days they owned the home. Need this notarized? 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If a bill is unpaid, the seller credits the buyer for the days they owned the home. Have a closing coming up? [The closing package (signing, scanbacks and courier)](/notary/packages/closing-package). The same method applies to HOA dues, rents, fuel left in a tank and sometimes sewer or water charges. ## Prepaids Prepaids are costs the buyer pays at closing in advance. They include the first year of homeowners insurance, interest from the closing date to the end of that month, and an initial deposit to the escrow account. They look like fees but they fund actual future bills. Prepaid interest depends on the closing date, so a closing early in the month costs more than one at the end. ## How tax proration is calculated Many places bill property taxes in installments, some in arrears and some in advance. The title company uses the local schedule and a day count, often with a 360 or 365 day year depending on the contract. The method should be spelled out in the purchase contract or by local custom. Ask your attorney or agent which method applies, since it can shift a few hundred dollars. ## Checking your statement Compare the closing date with the proration dates. Check the daily rate, the number of days, and who is credited. Ask whether the tax figure is based on a current bill or an estimate, and what happens if the final bill differs. Some contracts allow a later reconciliation. Look for the same HOA charge showing up twice. ## Why it matters at signing A signing agent can show you where numbers appear but cannot explain them or change them. If a figure looks off, call the title officer before you sign, not after. Ask for a revised statement if numbers change, and keep the final one with your records for tax preparation. Your CPA may need it when you file. ## A proration example and items people forget Say closing is in the middle of a tax quarter and the seller already paid the quarter in full. The buyer reimburses the seller for the part of the quarter after closing. If the tax is billed after the quarter, the seller credits the buyer instead. Either way, the title company computes the days and shows the result as a credit or charge on each side of the statement. Utility final readings, fuel oil in a tank, pre-paid association dues, and rents collected from tenants are often adjusted too. If your purchase includes a tenant, deposits and rent are a special item to review. Ask your attorney how security deposits are handled, since they must be transferred or credited. When you read your statement, remember that credits and debits do not have to match in size. A credit to the buyer for unpaid taxes appears as a debit on the seller's side. If both statements show different dates, ask why. A consistent set of dates throughout the statement is a good sign that the title company calculated everything on the same basis. ## Common questions **Why do I owe interest at closing?** Mortgage interest is paid in arrears, so the first payment covers the month after closing. Prepaid interest covers the days between closing and month end. **Who pays HOA transfer fees?** The contract and local custom decide. Check your purchase agreement. **Can numbers change after closing?** Sometimes, if an estimate was used. Ask the title company about post-closing adjustments. ## More notary guides - [Condo and HOA Paperwork at Closing: What to Expect](/notary/guides/condo-and-hoa-documents-in-a-closing) - [Mortgage Escrow Accounts: Taxes, Insurance and Shortages](/notary/guides/escrow-account-impounds-taxes-and-insurance) - [Quitclaim Deed Signing With a Notary: A Walkthrough](/notary/guides/quitclaim-deed-signing-with-a-notary) This guide is general information, not legal advice. 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