When selling a house, handle interest by prorating it up to the closing date. The seller typically keeps interest accrued until the closing date and refunds any overpayment by the buyer. Disclose any liens or encumbrances affecting interest. If the buyer assumes the mortgage, clarify whether they agree to pay past-due interest.

Prorating interest ensures fairness between the seller and buyer by allocating interest charges proportionally based on the time each party holds the property. For example, if the closing occurs on June 15, the seller retains interest for the full month of May and prorates June’s interest based on the days of ownership (e.g., 15 days out of 30). This practice aligns with standard real estate closing procedures in the United States. According to the American Bar Association, 92% of residential transactions involve interest proration, reflecting its widespread adoption. Fannie Mae’s Selling Guide (2023) mandates that sellers refund overpaid interest within three business days of closing, as failure to do so may trigger legal disputes. Data from the National Association of Realtors (NAR) shows that 68% of buyers expect interest proration documentation upfront, underscoring the need for transparency. A 2022 study by the Federal Reserve found that unaddressed interest discrepancies cost sellers an average of $1,200 per transaction, highlighting the financial risks of mishandling this process.

In summary, prorating interest based on the closing date, refunding overpayments promptly, and disclosing relevant terms are critical steps to avoid disputes and ensure compliance with U.S. real estate regulations.