Let’s talk about “skipping” mortgage payments when you refinance. I’m using air quotes here because you don’t actually skip anything—you’re still paying for it. But, yes, you do get to skip writing that check for a month or two. Let me explain how it works.

Are Mortgage Payments Paid in Advance or Arrears?

Most people don’t realize this, but mortgages are paid in arrears. This means when you make a mortgage payment in, say, September, you’re actually paying for August’s interest.

So, when you make that September payment, you’re covering the interest accrued for the previous month.

How Does This Work During a Refinance?

Let’s say you’re refinancing, and your loan closes on September 10th. At this point, you haven’t yet made your September mortgage payment. That means you haven’t paid for August’s interest yet.

Here’s what happens:

  • When your new loan funds on September 10th, your mortgage balance is going to be higher than usual because you haven’t made your September payment yet.
  • The August interest and the first 10 days of September interest will be added to your loan payoff.
  • But here’s the good news: You get to skip a mortgage payment.

How Skipping a Mortgage Payment Works

Let’s use our example of closing on September 10th:

  • You’ll have to pay the interest for the first 10 days of September at closing.
  • The remaining 20 days of September interest will also be added to your closing costs.
  • Because you’ve already paid for all of September’s interest, you won’t need to make an October mortgage payment.

Your first payment won’t be due until November, and that payment will cover October’s interest. That’s why it feels like you’re skipping a payment, but technically, you’re still paying for it—it just gets rolled into your closing.

Can You Skip Two Mortgage Payments?

Yes, it’s possible to skip two mortgage payments in certain situations.

Here’s how:

  • If you haven’t made your September mortgage payment, then at closing, your loan payoff will include 31 days of August interest plus any September interest that’s accumulated before your loan funds. The rest of September’s interest is collected at closing as per diem interest. Meaning, all of September’s interest is paid for: some part in the loan payoff and the other part at closing as per diem interest.
  • In this case, you won’t have to make your September payment (for August’s interest) or October payments (since September’s interest was covered in the loan payoff and the per diem interest collected at closing).
  • Your first payment wouldn’t be due until November, and that would cover October’s interest.

Important Considerations When Skipping Two Payments

Skipping two payments isn’t always possible. Some loans and lenders have restrictions, such as:

  • Loan-to-value limits: If your LTV ratio is too high, the lender may not allow you to skip two payments.
  • Timing issues: You must close and fund your loan before the 30-day late mark to avoid a hit to your credit score.

Additionally, if you close after the 15th of the month, you might incur a late fee from your current mortgage company, which could be around $100–200. This fee will be added to your loan payoff, but it won’t affect your credit score as long as you close before 30 days late.

What Is a Short Pay?

Now, you might have heard of something called a short pay. While it’s not directly related to skipping payments, it’s worth mentioning. A short pay is when you don’t get to skip any mortgage payments during the refinance process. This is rare and typically not done during refinances, but it’s another option to discuss.

Conclusion: Should You Skip a Mortgage Payment?

Skipping one or two mortgage payments can be a great financial relief during a refinance, but it’s important to know that you’re not getting anything for free. The interest is still being paid—it’s just being handled differently.

If you have any questions about whether you can skip one or two payments during your refinance, or about short pays, feel free to reach out. The Mortgage Mark Team is always here to help answer any questions.

mark pfeiffer

Mark Pfeiffer

Branch Manager
Loan Officer, NMLS # 729612
(972) 829-8639
MortgageMark@MortgageMark.com

 

Mark Pfeiffer is a Mortgage Loan Originator with CMG Home Loans and a veteran of the mortgage industry since 2003. Mark is responsible for ensuring all loans originated by the Mortgage Mark Team offer competitive terms and close on-time.

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