Skipping 2 house payments

Reblogger Ellen Dittman
Real Estate Agent with Watson Realty Corp.

This is very interesting mortgage payment information. It is especially valuable to first time home buyers who may be struggling and trying to come up with a down payment.

Original content by Doug Walker NMLS#: 274064

Skipping a house payment is actually used occasionally as a marketing strategy for refinancing.  It is especially nice around the holidays when extra cash is always needed.  It is pretty common knowledge that a payment is not necessary the month following a new mortgage closing, but there is actually a way to skip 2 payments.  If the refinance is closed by the 15th of January, for example, a homeowner can roll their January payment into the loan by just letting the accumulated interest due for December be added to the payoff.  Since the first payment on the new note is due in March, they skip the February payment.  Voila!  2 payments skipped.

Buyers can also use a similar strategy to time their transaction and minimize the amount of cash needed at closing. If a buyer closes on the loan in the 10th day of the month, we can actually pretend (from the pro-rated interest aspect at least) that it closed at the end of the previous month.  The mortgage company actually gives the buyer an interest credit from the 1st to whenever the loan closes.  This is usually allowed for up to 10 days.

This option reduces the amount of cash needed to close the transaction, but it accelerates when that first payment is due.  This will put the note's first payment date as the 1st of the following month, effectively making the first payment due in 20 days or so.  If a buyer is strapped for cash and can make that first payment in a few weeks after another paycheck, closing before the 10th of the month is the cheapest time of the month to close a purchase transaction.

On the flip side....If the buyers have the extra money for the pro-rated interest and the closing is scheduled for the first part of the month, I recommend that they pay the interest to finish out the month.  Then their house payment is put off until the 1st of the month following the next month - 50-60 days away!  Paying a few hundred dollars in interest is a cheap way to put their FULL PITI payment off another month.


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James Lyon
LyonSF - San Francisco, CA

I like the timming of the post, it sounds like from the title that it might have more to do with being deliquent on the mortgage.

Dec 02, 2011 11:12 AM #1
Alan Grizzle
Chestatee Real Estate - Dahlonega, GA
Full Time Realtor, Lifelong Resident of Dahlonega

I don't think refinancing to skip two payments is such a good idea. It sounds more like grasping for straws.  The only good reason to refinance in my opinion is to get a better rate to save money in the long run.

Dec 02, 2011 11:47 AM #2
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Ellen... what I often do when I am selling a new home... is have the buyers close on the 2nd or the 3rd of the month.  Then, I arrange for the seller... the builder... to pay all of the buyer's closing costs and prepaids... (within the limits of the mortgage... usually six percent of the loan amount.)

That way... the buyers can close, they can limit the cash they must bring to closing, and they also get to go almost two months before they have to make a mortgage payment.

Jan 14, 2012 03:31 PM #3
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Ellen Dittman

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