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Can I skip a mortgage payment?

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  • Can I skip a mortgage payment?

    Hey guys, got a question for you, and my bank seemed a little unsure, so I thought I'd tap you guys for some knowledge.

    Currently have a 15-year fixed 3.5% mortgage that I've been paying ahead on for about a year and a half now - normal monthly payment is around $2,200, and I've been paying $2,500. I've gotten so far ahead that I no longer even receive a monthly statement from the bank, since the computer sees that nothing is owed on a monthly basis at this point.

    I've got some big expenses in the next couple of months (disability and life insurance premiums are coming due, truck needs a new radiator, etc.) and was wondering if it'd be ok to skip a mortgage payment to maintain cash flow. It's not something I absolutely need to do, but it'd make me feel better if nothing else. I figure paying ahead has afforded me the flexibility to do this, and the bank seemed to agree, but like I said, the guy didn't seem all that sure - I don't think people paying ahead is something they encounter much! For anybody that knows, I've got some questions -

    Will this affect escrow payments, which account for my homeowner's insurance and property taxes?

    Will I erase all the progress I've made by paying ahead?

    Since interest accrues daily, will I have a ton more in the next month's payment since I didn't pay anything this month?

    FYI this is the only debt that I have. Thanks for the info guys!

  • #2
    It's too bad the bank is unsure, because they are the ones that really need to answer the question.

    You can go back to your original loan documents, which should outline what is done with extra payments.  For my mortgage, it is automatically applied to the principal. This is desirable for me, because it immediately goes to reduce interest payments (rather than being held for some future payment). I'm still expected to make a monthly payment every month.

    My wife had some student loans that she paid extra on, and eventually they did not demand a monthly payment because she got so far ahead. However, she clearly got a statement every month showing that nothing was due.

    So it all comes back to the loan documents, but my guess is that you need to keep making monthly payments even though you paid extra.

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    • #3
      Hard to believe the bank couldn't give you a clear answer. I guess it will at least partially depend on how their accounting system handles it. You'll have more interest applied to your next payment, but shouldn't bee too bad. And the skipped payment will just be added to the end of the loan, the date of which you've already moved up substantially, it appears. They'll probably double up on escrow with the next payment or you might be far enough ahead to miss a month as some escrows have a bit of float built in. You could always send in a check to be applied to escrow alone.

      My concern would be something you didn't mention - would it affect your credit score in any way? I don't know the answer ottomh but I'm sure someone around here does.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        You need to get a clear answer from your bank on:

        1. Do you still have my mortgage, or did it get sold to another lender?

        2. How much do I owe.

        3. Why aren't my payments applied correctly? (meaning, to principle, and not future payments)?

        4. When is my next payment due?

        ... if you are really ahead, then technically you can skip one, but need the above to be sure!

         

         

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        • #5
          I left this out, but they did tell me for sure that it would not be a late payment. According to their records, my next payment is due June 1st. So I should be ok, right?

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          • #6




            I left this out, but they did tell me for sure that it would not be a late payment. According to their records, my next payment is due June 1st. So I should be ok, right?
            Click to expand...


            You're clear on that one.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              it seems you've made a mistake. You've been sending extra money to the bank but not requiring they apply that extra money to principal.  Essentially you've lent $500 per month to your bank and not charged them any interest for the privilege.

              So yes, you can skip payments because you've already made them. Your bank thanks you for the interest-free loan.

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              • #8
                I would be very careful about this. I don't know I would trust any level one CSR's. As has been pointed out, most mortgages would apply this to principal and not deferring future payments. It is possible as there are mortgages with this feature, but I would want this in writing before I would risk skipping a mortgage payment.

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                • #9
                  I once saw this with a car loan but it was spelled out in the paper work that as long as I was keeping up with payments schedule, there was no penalty for skipping one month because I had prepaid.
                  Mortgages are a different animal. They buy and sell these all the time.
                  It sounds like you haven't had the extra applied to principle so it might be okay but the only way to know it is safe is to get a written okay from the mortgage department. I would make sure it is written down.

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                  • #10
                    If I'm going to pay extra on a mortgage, I'm not going to pay it in advance, I'm going to pay extra on the principle.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                    • #11
                      Agreed. It seems you have paid the payments in advance (scheduled monthly principles plus interest) instead of applying to the principle. Emaning you are not actually saving any interest by paying more earlier. I sent a bank a lump sump recently, confirming it to be applied to the principle only. The following month I get the notification to pay my usual monthly due amount, but my principle has decreased quite a bit, meaning my remaining mortgage term has gotten shorter, and in turn less interest over time, if I understand it correctly.

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                      • #12
                        Read your note.  Everything should be in the note.

                        If your cash is that tight that those items you mention are pushing you to the limit, you should not be making excess monthly payments.  This is what a cash cushion is for.

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                        • #13
                          Called the bank today and asked to speak to someone higher up. They did confirm that my extra payments have indeed gone toward the principal and not toward future payments, so the first guy was wrong. She also told me that I was far enough ahead that I could skip a principal payment if I wanted to, but that I'd still need to pay the escrow and interest for the month. All in all, it's not even going to be that much less really, so I think I'll just pay it.




                          Read your note.  Everything should be in the note.

                          If your cash is that tight that those items you mention are pushing you to the limit, you should not be making excess monthly payments.  This is what a cash cushion is for.
                          Click to expand...


                          I have a cash cushion. It was purely a cash flow deal, and nothing that's going to break me. I'm just going to go ahead and pay my normal payment.

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                          • #14
                            I agree with you.

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                            • #15




                              Called the bank today and asked to speak to someone higher up. They did confirm that my extra payments have indeed gone toward the principal and not toward future payments, so the first guy was wrong. She also told me that I was far enough ahead that I could skip a principal payment if I wanted to, but that I’d still need to pay the escrow and interest for the month. All in all, it’s not even going to be that much less really, so I think I’ll just pay it.




                              Read your note.  Everything should be in the note.

                              If your cash is that tight that those items you mention are pushing you to the limit, you should not be making excess monthly payments.  This is what a cash cushion is for.
                              Click to expand…


                              I have a cash cushion. It was purely a cash flow deal, and nothing that’s going to break me. I’m just going to go ahead and pay my normal payment.
                              Click to expand...


                              Thank goodness.

                              In the future make damned sure this is going to principal!!

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