I’m often asked about skipping a mortgage payment when refinancing. Can it be done?
What it really pertains to is pre-paid mortgage interest. Unlike rent, which is paid forward, mortgage interest is collected in arrears. When you pay your rent on the first of the month, you’re allowed to live in the property for the next 30 days.
With a mortgage payment, a lender can’t collect interest unless they’ve actually earned it. Say, for example, you’re closing a refinance on November 15th. Part of the payoff from your existing lender will include mortgage interest that they’ve earned from November 1st through the 15th.
Your new lender, on the other hand, won’t have enough time between November 15th and December 1st to set up your account and get a new mortgage statement out to you. Instead, they’ll pre-collect that interest from November 15th through the end of the month. Your next mortgage payment would then be due on January 1st and would cover all of the mortgage insurance from December 1st through the 31st.
So while you’re ‘skipping’ a mortgage payment on December 1st, you’re actually just paying it late (or early) depending on the date of closing.
Hopefully, this clears the air about the idea of a skipped mortgage payment when refinancing. If you have any more questions I can answer, don’t hesitate to give me call or send me an email anytime. I’d be happy to help you!