Okay, so let’s say you’ve decided mortgage rates aren’t going any lower and in fact will probably be going back up sometime later this fall. You have three rental properties and you can get a lower rate and shorten the term. Now it’s time to shop around for a lender, right?

One with the best combination skipping two mortgage paymentsof rates and fees. You start your quest by making a few phone calls to your bank and your current mortgage company and a few others but you soon find out everyone is pretty much the same. But one advertisement did pique your interest, the one telling you that if you refinance with them you can skip two mortgage payments. Not a bad deal, right? That sure would help with the monthly cash flow, right?

While skipping two mortgage payments is technically true it’s really a bit disingenuous. Here’s how it plays out. You apply for the refinances and your new lender will order your payoff from your existing lender, telling the lender which day of the month the closing will take place. Your new lender sets a closing date on the 20th and tells you not to make the mortgage payment this month.

The old lender provides a payoff amount, the amount needed to pay off the loan entirely that includes 20 days of accrued interest. Don’t forget that interest is paid in arrears. Your new lender will also collect from you 10 days of interest that will accrue on the new mortgages. Those 10 days are your first mortgage payment with your new lender but your new lender will roll that interest in your new loan along with the 20 days of old interest.

It may then “feel” like you skipped two payments and while you didn’t write a check for them they do in fact exist and rolled into your new loan. You have the option of not having your new lender do this and pay the mortgage out of pocket, but when you hear a lender talk about “skipping payments” they’re referring to what all lenders do during a refinance. It’s no real secret.