A grace period can be a useful tool for getting through a temporary drop in your ability to pay, but it can also considerably increase the total cost of a mortgage if you don't fully understand how it works before requesting it.
What a grace period is
It's a period agreed at the start (or during the life) of the mortgage in which the monthly installment is reduced, either because you only pay interest (partial grace period) or because you pay nothing at all (full grace period), pushing the repayment of principal further down the line.
Full grace period vs. partial grace period
- Partial grace period: during the agreed period, you only pay the interest generated by the outstanding principal, without repaying any principal. The installment is lower than an ordinary one, but it doesn't disappear.
- Full grace period: during the agreed period, you pay nothing at all, neither principal nor interest. The unpaid interest accrues and is added to the outstanding principal, increasing the total debt on which future interest will be calculated.
Why a full grace period is especially expensive
With a full grace period, you're not just failing to repay principal during that time: the unpaid interest is capitalized, meaning it's added to the outstanding principal, which in turn generates new interest on that larger amount. The result is that, by the end of the full grace period, the outstanding debt can be considerably higher than at the start, significantly increasing the total cost of the loan over its entire life.
When a grace period can make sense
- When buying a home that needs renovation before you can move in, so you don't have to simultaneously cover rent on another home and the full installment of the new mortgage.
- Facing a temporary, well-defined drop in income (for example, during unpaid leave to care for children), as long as you have reasonable certainty of recovering your ability to pay once that period ends.
Why you shouldn't request it "just in case"
Requesting a grace period without a real, specific need simply makes the loan more expensive with no benefit in return, since you end up paying more total interest with nothing to show for it. A grace period should be reserved for situations where it genuinely reduces a specific financial risk during a defined period, not as a generic way to "start off paying less."
How to negotiate a grace period if you need one
Like other mortgage terms, the availability and length of a grace period are negotiable with the bank, and not every lender offers it on the same terms. It's worth comparing this option across different offers if you already know in advance that you'll need it.
Calculate the real cost of a grace period
Our mortgage calculator lets you compare your amortization schedule with and without a grace period, so you can clearly see how much additional principal you'd accumulate during that time.