Mark David

It's no secret that Canada's major banks offer their clients the opportunity to skip mortgage payments. While this can work to their advantage, industry experts are not big supporters of the option.

Bank customers are attracted to this method because no additional fees are required. Not surprisingly, the banks have been actively promoting the skip-a-payment option.

"In most cases, there is no fee for this option, and your payments won't change during the term of your mortgage," explains Marcel Greaux, a broker with Mortgage Alliance.

Although consumers enjoy the comvenience it provides for them, skipping payments can potentially create a treacherous situation for them long term.

"Any skipped interest is added to the principal balance," Greaux explains. "This is where it gets dangerous, as the increase costs start to compound and ultimately work in favour of the lender, not the borrower."

Despite his understanding of the skip-a-payment option, Greaux believes mortgage brokers should not recommend it to their clients.

"I would say the option is convenient to have available, but should only be used in an absolute emergency," he says. "Skip-a-payment is more like defer-a-payment due to the interest compounding at a later date."

He adds that "a more prudent measure to access funds may be to make use of a line of credit, if available."

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