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. Escrow will stop payment on any proceeds check issued to the borrower to cover any shortage and will use any means to collect the shortage from the borrower.

It is not uncommon for borrowers to be confused by their last mortgage statement indicating principle owed and the actual amount to be paid off as indicated by escrow—escrow’s amount is usually higher. The difference in the payoff statement escrow calculated takes into account all accrued interest, principle owed and fees—escrow typically collects a day or two extra of interest in the event the payoff is received a tad late due to hick-ups in overnight delivery by UPS or FedEx.

Hope that’s helpful!

-Legacy Escrow Service, Inc. Staff