Those of us in the mortgage industry have heard pretty much every type of “pitch” out there trying to solicit your mortgage business. Sure, everyone talks about their low rates and excellent service, but really who would advertise otherwise, right? One type of solicitation crops up every so often and while the claim is true it’s also misleading. And lenders who make this claim may not be your best choice when selecting a VA lender. What’s the phrase? “Refinance with us and skip two payments!” Who can legitimately make this claim and when can you ever skip two payments without hurting your credit and getting a quick phone call from your lender?
During the process of refinancing your VA loan at some stage your new lender will contact the existing VA mortgage and order a payoff. The new lender will provide a closing date to the old lender and the old lender will then tally up the daily interest that will accrue up and until the refinance is fully funded. If the loan is scheduled to close and fund on the 25th, there will be 25 days of per diem interest added to your loan payoff. Remember that interest is paid in arrears, that means if you haven’t made the payment on the first and you have a closing scheduled for the 25th, your payment is essentially rolled into your new loan amount.
Likewise, your new lender will collect interest from the 25th up to the first of the following month, or in this example five days. Your new loan will have closing costs rolled into it along with 25 days of interest at the higher rate and five days of interest on the new loan. But you didn’t have to write a check for either monthly payment because they were both included in the loan amount. You have the option of paying the daily interest out of pocket or go ahead and rolling all or part of the interest in your loan. Yes, you “skipped” two payments but in reality they were included in your new loan amount and spread out over the term of the loan.