Should I stop payment or skip a mortgage payment during escrow? The quick answer is no. A common scenario unfolds during a refinance or the sale of a home. Since an existing loan is going to be paid off should I make my current payment or skip it?The potential pitfalls of not making a payment or “stop payment” on a payment in progress is costly and very inconvenient to both the borrower and the escrow office. If you skip or stop your mortgage payment you may:

• incur needless bank fees for stop payment or NSF.
• incur needless “stop payment” fees also charged to you by your escrow office.
• if a borrower receives a proceeds check from escrow and starts writing checks for bills or purchases on those funds and escrow has to stop payment on that check because of a payoff shortfall created by the borrower by stopping payment on their mortgage, the borrower’s bank will likely charge for every bounced check that occurs.
• Important: if you are considering skipping a mortgage payment PLEASE let your loan officer know because it may jeopardize your current loan approval.

By skipping or stopping payment on a mortgage payment in progress, the borrower may have just cost themselves a lot more interest accruing on their loan until the loan is paid in full. It is not uncommon for a lag time between the time a lender receives an escrow payoff and when escrow is notified of the shortage due to a borrower not making the last scheduled mortgage payment. The lag time could be as long as a couple weeks, maybe more. This is very expensive for the borrower. Read the rest of this entry »