It’s no secret that having a good credit history is important when buying a home in Canada. But what if you don’t have one? Don’t worry – there are still ways for you to buy your dream home! In this…
We all have those months where it seems multiple bills become due at once, the car breaks down, we need to pay our kid’s tuition, etc. So, the idea of being able to skip a mortgage payment sounds like a dream come true when you need some extra money to get you through the month. There are, however, many considerations to make when deciding if skipping a mortgage payment is your best option.
While the banks want you to think they’re offering for you to skip a payment as a favour, it’s important to realize that lenders are in the business of making money. They’re not going to promote something that doesn’t benefit them in the long run.
- You won’t be charged an upfront fee to skip a payment and your regular mortgage payments won’t change, but the portion you skipped plus interest will be added to your mortgage balance
- If you add to your outstanding mortgage balance, when your mortgage is up for renewal, your monthly payment amount increases to account for the higher balance
- Paying your mortgage regularly will benefit you the most over time
What happens if you skip a mortgage payment?
If you decide to skip a mortgage payment – with a lender who offers this option, of course, because not everyone does – you’ll still be responsible for paying your usual insurance premiums and property tax installments, where applicable.
You won’t be charged an upfront fee to skip a payment and your regular mortgage payments won’t change, but the portion you skipped plus interest will be added to your mortgage balance. This means that, when your mortgage is up for renewal, your monthly payment amount increases to account for the higher balance.
Lenders who offer “skip a payment” options generally allow you to do so once every year as long as:
- The mortgage is not in arrears
- Your current mortgage balance, together with the amount of the payment(s) you wish to skip, does not exceed the original amount of your mortgage
Tip: It’s important to do the math to see in dollars and cents how much skipping a mortgage payment could really end up costing you.
Will skipping affect my total mortgage amount paid?
Yes. Interest is capitalized, which means it’s added to your outstanding principal balance. And when you skip a mortgage payment, you’re not paying down your principal balance or the interest charged against this outstanding amount.
Important: If you’re already behind on your mortgage payments, you can’t take advantage of a skipped payment, which is when you may need it most.
Mortgage payment plans aren’t meant to be one-size-fits-all.
Chat with a nesto mortgage expert & get a mortgage payment fit to you.
Can I repay my skipped payment(s)?
Yes, you can repay the skipped payment but, in order to get back on track to where you were before the skipped payment, make sure you account for the added interest you were charged in the meantime.
Is skipping a payment a good idea?
Unless skipping a mortgage payment is your last option, it’s not recommended that you take this approach because, like most things that sounds too good to be true, this choice is as well.
Paying your mortgage regularly is going to benefit you the most over time. It’s always important to read the fine print and ask questions when using a product or savings tool advertised by your lender. Better yet, speak to your nesto advisor – we know the ins and outs of all the bank offerings and can help advise you on your very best options based on your unique circumstances.
Other articles in this guide: “How to Choose a Mortgage Rate“
- Mortgage Terms in Canada
- Should I get a Fixed or Variable Mortgage Rate?
- Mortgage Prepayment
- Porting and Assuming Home Loans in Canada
- What is a Cash Back Mortgage?
- Prime Interest Rate in Canada
- What is a Collateral Charge Mortgage
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