There may be times when you fall behind on bills, don’t save enough money for your monthly expenses or simply forget to make a payment. But when it comes to your mortgage, it's important to remember that you can miss a payment but you can’t actually skip it. Lenders don’t always provide you with the intricate details about how skipping a mortgage payment will impact you in the long run. So, we’re going to break it down for you so you’re empowered to make these important financial decisions on your own.

Can I skip a mortgage payment?

Your ability to skip a mortgage payment will depend on your mortgage terms. There are a few lenders that allow borrowers to skip one to four payments per year. This offers flexibility and enables the borrower to adjust for unexpected costs that can occur within a month.

What are the consequences of skipping a mortgage payment?

Skipping a month’s payment will result in interest capitalization – this is when interest is charged and added to your total mortgage balance. Since the interest is calculated on the mortgage balance, it should decrease over the course of your term. However, if you skip a payment then the interest amount will get added back to your outstanding balance and you’ll be required to pay more over time.

Let’s say for example that you have a $680,000 mortgage, amortized over 25 years with a five-year fixed mortgage rate of 3.1%. This means your monthly payments will be $3,260.

To simplify the example, let’s assume you’re skipping your very first payment. Interest is calculated by taking the principal mortgage, multiplying it by a rate of 3.1% and then dividing that by 12 months, equalling to $1,756.66 in interest.

So if your first mortgage payment is skipped, then the total mortgage amount will increase to $681,756.66. The next interest payment will be calculated on this new mortgage amount and increase by $4.54 to $1,761.20. While this doesn’t seem like a lot, interest will continue to add up over time.

Can I repay a missed mortgage payment?

If you have the funds available, you can certainly repay the missed portion of your mortgage at any time during your term. In order to avoid the additional interest capitalization, however, you are required to pay back all the missed months payment as well as the interest accrued.

When should I consider skipping a mortgage payment?

While there are financial circumstances that may lead to a skipped mortgage payment, this is not an ideal situation and should be avoided at all costs. Being consistent with your monthly payments will be beneficial to you long term as it helps you set a clear budget for yourself, it mitigates the risk of increased interest and helps you pay off your mortgage in a shorter period of time. It may seem easy to skip over a payment but these costs can quickly sneak up on you and make it more difficult to pay off your debt.

Homewise wants to help you lock in a mortgage that will suit your financial situation and set you up for success so you’ll never have to skip a payment. Apply online in less than five minutes and our dedicated Mortgage Advisors will get in touch and answer any questions you may have.