What Is a Skip-Payment Mortgage?

A skip-payment mortgage is a home loan product that allows a borrower to skip one or more payments without any penalty. The interest accrued during the skipped peri꧟ods will instead be added to the principal, and monthly payments will then be recalculated once they resume.

Skip-payment mortgages are most common outside of the United States, especially in Canada and i♏n some Asian countries.

Understanding Skip-Payment Mortgages

A s♊kip-payment mortgage program is designed to provide relief to borrowers who experience a temporary hardship such as illness or injury. Each Canadian bank offers its own 🔯program, but in general, the programs allow the equivalent of one month of skipped payments per year.

Borrowers must have a strong credit score to qualify for a skip-payment mortgage and they must otherwise be up to date on their mortgage payments. Borrowers should be aware that they will still owe the interest and 澳洲幸运5开奖号码历史查询:principal that they would have paid in that month. In fact, the election to skip a payment adds to the inter🧜est cost over the life of the loan. The interestꦍ is rolled into future payments and the principle remains unchanged since no monthly payment was made.

The borrower is also responsible for covering insurance and property tax during the skip period. The upside of the skip-pa⛄yment offer is that the borrower can miss a payment withoutꦇ any damage to their credit score.

Some Canadian banks even offer an extended skip-payment program which allows the borrower to skip up to four consecutive months of mಌortgage payments. The banks cautio♋n consumers that taking advantage of such an offer will significantly add to the interest costs of a loan.

Misleading Skip-Payment Offers in the U.S.

U.S. consumers often receive marketing materials from lenders offering the chance to skip one or two months’ mortgage payments. Borrowers should treat these offers with extreme prejudice, as they tend to actually be advertisements for 澳洲幸运5开奖号码历史查询:refinancing programs. As part of the💦 refinance settlement process, borrowers will often go for a month or two without making a monthly payment.

This gap in payments can lead to a false impression that refinancing lets the borrower off the hook for a monthly payment or two. The borrower will still be responsible for making those payments; in many cases, these payments are lumped into 澳洲幸运5开奖号码历史查询:closing costs.

Some U.S. financial institutions do offer skip-payment plans on car, boat, or credit card loans, but caveats sim𒁏ilar to those of the Canadian pro﷽grams apply. Borrowers will still have the principal balance to pay, and will likely add to the interest costs of the loan by choosing to skip a payment.

The Bottom Line

With a skip-payment mortgage, a borrower can skip one or more payments without triggering penalties and fees. Interest is still a🔜ccrued during the skip period 🎉and added to the principal. Once the payments start again, monthly payments are recalculated to reflect the larger amount of interest owed.