Will Refinancing Let You Skip a Mortgage Payment?
It usually looks that way, but it isn't free money. Mortgage interest is paid a month behind, and the new loan collects interest at closing to cover the gap, so the cost just shows up in a different place. Skipping two payments in a row can happen, but only with certain closing dates. Separately, your old servicer has to refund any money left in your escrow account.
Last updated September 29, 2026Why does it look like I skip a payment?
Mortgage interest is paid in arrears: each payment covers the interest from the month before. When you refinance, the new lender collects prepaid daily interest at closing for the rest of that month. Because of that timing, most borrowers make no payment on the old loan after closing, and the first payment on the new loan usually isn't due until the first of the second month after closing. Close in June, for example, and the first new payment is often due August 1. That gap feels like a skipped payment.
It works the same way on a rate-and-term refinance as on a cash-out. Skipping two payments in a row depends on exactly where your closing date falls in the billing cycle, so don't plan on it.
Is the skipped payment free money?
No. The interest doesn't disappear. It's either paid at closing as prepaid interest or added to the new loan and paid over time. The short-term relief is offset by about the same amount in closing costs or loan balance, so think of it as a timing shift, not a savings.
Will I get money back?
Often, from your escrow account. Under federal servicing rules, when your old loan is paid off, the old servicer has to refund any remaining escrow balance, the money held for taxes and insurance, within 20 days, not counting weekends and legal holidays. It's separate from your new loan and easy to overlook. How much comes back depends on your taxes, insurance and where you are in the escrow year.
It depends on your situation:
- Closing early or late in the month: changes how much prepaid interest you pay and when the first new payment is due.
- Cash-out or rate-and-term: the timing works the same for both.
- Your escrow balance: decides how big the refund is.
- Your closing costs: your Closing Disclosure shows whether you owe anything at closing.
| Do you skip a payment? | It usually looks like one, because interest is paid in arrears |
|---|---|
| Two payments in a row? | Only with certain closing dates |
| Is it free money? | No; the interest is paid at closing or added to the loan |
| Escrow refund from the old servicer | Within 20 days of payoff, excluding weekends and holidays |
Related questions
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- can Family Members Give Gift Funds or a Gift of Equity to Cover My Down Payment
- can I choose my own appraiser, use my own contact, or ask to avoid a specific appraiser
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Sources
- https://www.foresthillsmortgage.com/insights/how-mortgage-interest-works/
- https://www.getloans.com/blog/you-skip-a-mortgage-payment-when-you-refinance/
- https://www.catalystmortgage.com/do-you-skip-a-mortgage-payment-when-you-refinance/
- https://www.consumerfinance.gov/rules-policy/regulations/1024/34/
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.