When some homeowners think of a “mortgage payment” vacation, they might think that it’s simply some time off you take when you can’t, or don’t want to, pay your mortgage. Truthfully, not paying your mortgage payment for a month or two without telling the lender will probably only result in you losing your house. But, there is such a think as a mortgage payment vacation, and you might be eligible to take one. But even if that’s so, you’re probably better off staying home – and continuing to pay for it, too.
A mortgage payment vacation is a period of time in which you can stop making mortgage payments. Typically, these “vacations” are only available to those that have spent a considerable amount of time prepaying their mortgage each month; that is, paying more than the required amount. Many people prepay their mortgage every month. It can save a homeowner thousands of dollars a year in interest alone and of course, it cuts a chunk off that principal each and every time. Prepaying can be a great option for homeowners that want to get out from under their mortgage more quickly – and they can be a great profit churner for banks, too. That’s why they offer them to the most diligent homeowners.
Once your lender has seen that you’ve been prepaying your mortgage for a considerable period of time, they might then send you a letter explaining that you’re now eligible for a “mortgage vacation” – some time off from making those payments. But you’re not really getting any time off. What you’re doing is applying those prepayments to the regular payments that you’ll be missing. The bank gets to charge you for interest, increasing their profits, and all of your hard work is for nothing. You’ll be back at Square One, trying to make the minimum payments and the interest accumulated. And if you want to get ahead of your mortgage again, you’re going to have to start all over.
It’s also worth noting that lenders will almost never make this offer on second mortgages, but mortgages in the first loan position only; the invitation is also generally only extended when it’s time to renew. Regardless though of when they offer it, you should always speak with your mortgage broker first. These “vacations” aren’t really designed to let the customer “get away from it all.” Instead, they’re made to keep the customer there (in a position they don’t want to be in) for even longer.
