What you should know: Will I get to skip a mortgage payment after my refinance?
With all the closing costs and paperwork associated with a refinance, wouldn't it be nice to have a little reprieve -- wouldn't it be nice to skip a month's mortgage payment?
As it turns out, sometimes you can. Here's how that works:
When your first mortgage payment is due is tied to the prepaid expenses collected at your closing
Mortgage interest is collected "in arrears" -- that is, this month's mortgage payment covers interest from last month (unlike renting, in which this month's rental payment allows me to live in the property this month.)
At the closing table, the title company will collect enough interest to cover the time between when your loan funds and the beginning of the month before your first mortgage payment is due. (For example, in a closing on Janary 15th with a first payment of March 1st, the title company would collect 16 days' worth of prepaid mortgage interest.)
This is why many people prefer to close at the end of the month: it minimizes the amount of money collected at closing for prepaid mortgage interest.
If your closing happens during the first five days of a month, however, you can set it up so that you don't skip a month. (For example, with a closing on May 4th you can choose to have your first payment due on June 1st. The title company will actually credit you four days' worth of mortgage interest this way, instead of collecting prepaid mortgage interest.)
Whichever way you decide, there are two things to keep in mind:
- You never get a free day in a mortgage, for which you don't have to pay interest, and
- You never have to pay twice for the same day
In a refinance, the payoff amount on your current mortgage includes mortgage interest up to a certain date. If that date is later than your closing date, your current lender will refund to you any interest paid as part of the payoff that overlaps your newly funded loan -- they'll also refund any remaining escrow account balance (the money they've been collecting for taxes and insurance.) By law they must refund these amounts to you within 30 days.
After 30 days, then, it doesn't make a difference -- you'll spend pretty much the same amount of money either way. If your current financial situation dictates that you minimize funds required at closing, you'll probably want to schedule your closing either at the beginning of the month and not skip a payment, or at the end of the month and skip a payment.
Quick interest rates
| Program | Rate | APR |
| 30 year fixed | 6.375% | 6.623% |
| Jumbo fixed 30 | 8.500% | 8.652% |
| 5 year ARM | 5.750% | 6.159% |
Contact Info:
720.297.8002 tel
720.294.0152 fax
