Wednesday, 24 July 2013

Mortgage - The non-payment option

While I was pretty thorough reading my mortgage documents before signing them I must admit that there was one part that I just skimmed.  You see I figured that the skip-a-payment option offered by my bank didn't apply to me.  After all when a girl's planning on paying off her mortgage in 5 years she hardly wants to take a "payment vacation."  (Have you ever noticed that the statement saying that interest continues grow on your unpaid portion is found at the very bottom in a font that would make a fly want to wear glasses?  Gee, wonder why that is!)

Recently though I decided to take a closer look at that part.  Turns out that while the normal skip option is available once every 12 months there is a deluxe option for those of us who have doubled our payments.  While I've not discussed this with my bank (not needing to use the option) from what I read it works like this; for every extra dollar you've paid they'll let you skip a dollar in payments.

If I am interpreting this correctly I could walk up to the bank tomorrow and ask for an extended payment vacation and not make another payment for over 2 and a half years ($20,631.58 extra paid divided by $646.62 per month = 31.9 months.)  Granted I would lose all the headway that I had made paying my mortgage off early and would have to sit there watching the interest slowly grow on the balance (which for me would be excruciatingly painful) but the important thing is that the bank would not foreclose on my house during this time.

Let me be clear, this is NOT my first safety net.  I have insurance coverage should I not be able to work, I have very marketable skills should I lose my job, and I have both emergency and personal savings that could keep me afloat (including mortgage payments) for 3 months to 3 years respectively.

What this safety net does provide is a means to hold onto my house for as long as it would take to sell and make other living arrangements should my life fall apart and my other safety nets become unreliable.  This option is obviously not as ideal as owning my own place outright it simply adds another layer of security, and that is always worth having.


  1. Fascinating little tid-bit. What State do you live in? I'm curious if this is a State-by-State type of thing which is written into legislation in some states, and not others.

    1. I live in the Ontario (Canada) and as far as I know my bank's payment rules are nation wide. I couldn't really comment on the US banking system as your regulation differ vastly from ours. (Sorry!) My end statement for this article would be take a look at these options when searching for a mortgage (or weighing your current mortgage) because they add some additional options if and when things go south,