Your winter vacation is finally over and now you in serious recovery mode. Are you craving your next vacation already? Either because you just had way too much fun and there just wasn’t enough time or you are mentally, physically, and/ or financially drained. After all holidays are a lot of work and expensive!

It would be nice to get rid of at least one responsibility and take a vacation from it wouldn’t be? Well a vacation from your mortgage shouldn’t be one of them.

Mortgage Payment Vacations- How they work:

You have probably seen advertisements for these at your bank or on-line and I must admit they look very intriguing. However, looking at the fine print, they are actually a really bad idea.

The way that “mortgage vacations” work is that you have to prepay a certain amount before you go on the “vacation.” This is a great idea as the more you pay towards your mortgage the less interest you pay over the term of your mortgage. At the end of your term and at the end of your mortgage, this means more money in your pocket because you saved on interest.

But if you are saving money, your lender is losing money. So they have come up with this brilliant plan to get it back or to “help you save up for that special event” or “recover from an expensive month.” The extra money that you prepaid on your mortgage to help you become mortgage free sooner is now made available to pay off your mortgage payments up to a few months, usually 4 months.

Why it’s a bad idea:

The reality is that during the break from your mortgage payments, interest is still accruing, so it’s not really a vacation. Some banks also say that they may have to change your amortization at renewal, which could lead to higher mortgage payments.

Are there other options?

A real mortgage vacation would be when you are completely mortgage free. Start your year by contributing a little more to your mortgage payments (anything is great) and set aside money in a high interest savings account for that rainy day. Plan for those vacations instead of taking the easy way out. Do not start your year going into debt over a bad vacation.