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Are Mortgage Vacations a Good Idea?

Is it actually a good idea to take a vacation from your mortgage?

There are a lot of advertisements promoting the benefits of mortgage vacations recently, so we decided to examine the benefits and potential downfalls so that you can decide whether or not a mortgage vacation is the right financial move for you.

What is a Mortgage Vacation?

A mortgage vacation allows you to skip a mortgage payment (for whatever reason) without incurring penalties or damaging your credit. Some lenders offer this while many do not. If available on your mortgage, iIn order to qualify for a mortgage vacation, you must first pre-pay for it. This involves temporarily increasing your normal monthly mortgage payments to pre-pay for the time you will not be making payments. What are the Benefits?

The main benefit is obvious: You can take the money you would have put towards your mortgage payment and stick it back in your pocket. You can then use this money for whatever you need, whether it is a vacation, and investment opportunity, or asset purchases.

What are the Potential Drawbacks?

However, skipping a mortgage payment might not necessarily benefit you in the long run. Banks and other lenders still need to protect their bottom line, so they will want to make sure that your account continues to remain profitable. To do this they will continue to charge you interest, and will not reduce your amortization period. In some cases, this may mean that your payments may actually increase in order to make up for the interest payments they may be missing out on.

So is it Worth It

In most cases, avoiding taking a mortgage vacation is in your best interest. Instead of prepaying your mortgage payments for a later date the money you would have used to temporarily increase your payments could be put to better use in a savings account or an investment. This will allow your money to grow and give you access to it when you need it.

If you have any questions about mortgage vacations, or about mortgages in general, you should contact your mortgage broker. They will be able to give you a more detailed picture based on your individual financial situation and goals.


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