What a Capitol Payment Plan is and how it affects your mortgage

A Capitol Payment Plan is a mortgage modification offered by some lenders that lets you temporarily pay less each month, with the difference added to your loan balance. The unpaid amount doesn't disappear — it gets rolled into what you owe, usually at the end of the loan or when you sell or refinance. This is different from a traditional loan modification that permanently changes your terms.

Capitol Payment Plans are most common when you're facing a temporary hardship: job loss, medical bills, or a drop in income. The plan gives you breathing room for a set period — often 6 to 24 months — while you stabilize. After that period ends, your regular payment resumes, and you begin paying back the deferred amount.

The trade-off is real: you're not erasing the debt, you're postponing it. Your loan balance grows, which means you'll pay more interest over the life of the loan and owe more when you eventually sell or refinance. But if the alternative is falling behind and damaging your credit, a Capitol Payment Plan can prevent that damage while you recover.

Key Takeaways

  • A Capitol Payment Plan reduces your monthly payment temporarily by deferring the difference to your loan balance, not by forgiving it.
  • The deferred amount becomes due when the plan ends, when you sell the home, or when you refinance — you will owe it eventually.
  • These plans typically last 6 to 24 months and require proof of financial hardship and a reasonable plan to resume full payments.
  • Your credit report will show the modification, which may lower your score temporarily but protects you from the larger damage of missed payments.
  • Not all lenders offer Capitol Payment Plans, and approval depends on your loan type, lender, and current financial situation.

Who offers Capitol Payment Plans and how to request one

Capitol Payment Plans are offered by some mortgage servicers and lenders, but not all. Your servicer — the company that collects your monthly payment — is the one to contact first. You can find the servicer's name and phone number on your mortgage statement or by logging into your online account.

To request a plan, call your servicer's loss mitigation or loan modification department. Be ready to explain your hardship: a job loss, reduced hours, medical emergency, or other temporary income drop. You'll need to provide recent pay stubs, tax returns, and a written statement describing your situation and when you expect to recover.

Your servicer will review your request and either offer a Capitol Payment Plan, suggest another option (like a traditional modification or forbearance), or deny the request. The timeline varies — some decisions come within two to four weeks, others take longer. Ask for a timeline when you apply.

How the payment reduction and deferral work

When you're approved, your servicer will set a new, lower payment amount for the plan period. The difference between your regular payment and the reduced payment is deferred — meaning it's added to your loan balance each month rather than forgiven.

For example, if your regular payment is $1,200 and your plan reduces it to $900, the $300 difference is added to what you owe. Over 12 months, that's $3,600 added to your balance. You're not paying it now, but you will pay it later, along with interest on that deferred amount.

Some Capitol Payment Plans are structured so the deferred amount comes due as a lump sum at the end of the plan period. Others spread it across your remaining loan term, raising your payment slightly after the plan ends. Ask your servicer which structure applies to your plan before you sign.

What happens when the plan ends

When your Capitol Payment Plan period ends, your regular payment resumes. If the deferred amount is being spread across your remaining loan term, your payment will be higher than it was before the plan started — it will include your original payment plus a portion of the deferred amount.

If the deferred amount is due as a lump sum, you'll owe it in full at that time. Some plans allow you to refinance to roll that lump sum into a new loan, but that depends on your equity, credit, and the lender's willingness to refinance. Don't assume you can refinance — ask your servicer what your options are before the plan ends.

If you're still struggling when the plan ends, contact your servicer again. You may be able to request another modification, though lenders are usually reluctant to stack multiple plans. A second request will require proof that your hardship is ongoing and that you still have a realistic path to recovery.

How a Capitol Payment Plan affects your credit and your loan

A Capitol Payment Plan will appear on your credit report as a loan modification. This will lower your credit score, but the damage is usually less severe than missing payments would cause. A modification typically drops your score 50 to 100 points, while missed payments can drop it 100 to 200 points or more.

The modification stays on your credit report for seven years from the date it's reported, but its impact on your score fades over time, especially as you make on-time payments after the plan ends. Lenders will see the modification when you apply for new credit, but many understand that a modification is preferable to default.

Your loan balance grows during the plan because of the deferred payments. This means your loan-to-value ratio (how much you owe compared to what your home is worth) increases. If you're already close to owing as much as your home is worth, this can make it harder to refinance or sell later without owing money at closing.

Capitol Payment Plans versus other hardship options

If your lender doesn't offer a Capitol Payment Plan, or if you want to understand your other choices, several alternatives exist. Forbearance pauses or reduces your payment for a set period, but the full amount becomes due at the end — there's no spreading it out. Loan modification permanently changes your terms (lower rate, longer term, or both), which is better if your hardship is permanent, but it's harder to get approved for.

A refinance can lower your payment if rates have dropped or your credit has improved, but it requires you to may have access to for a new loan and pay closing costs. Deed in lieu of foreclosure lets you hand the home back to the lender instead of going through foreclosure, which damages your credit less but means you lose the home.

The right choice depends on whether your hardship is temporary or permanent, how much equity you have, and what your lender will offer. A Capitol Payment Plan makes sense if you expect to recover within 6 to 24 months and want to keep the home. If your situation is permanent or you're deeply underwater on the loan, a different option may be better.

What to watch out for when considering a Capitol Payment Plan

Before you sign, understand exactly when and how the deferred amount becomes due. Get the plan terms in writing — don't rely on a verbal explanation. The document should specify the plan period, the reduced payment amount, how the deferral is structured, and what happens when the plan ends.

Ask whether making extra payments during the plan period will reduce the deferred amount or just go toward your regular payment. Some plans allow you to pay down the deferral early; others don't. Knowing this matters if your situation improves faster than expected.

Be aware that a Capitol Payment Plan is not a path to loan forgiveness. The money you defer will come back as a higher payment or a lump sum. If you can't afford your regular payment now, think carefully about whether you'll be able to afford a higher payment later. If the answer is no, a Capitol Payment Plan may only delay a larger problem.

Frequently Asked Questions

Will a Capitol Payment Plan stop a foreclosure that's already started?

It may, depending on how far along the foreclosure is. Contact your servicer immediately and ask about a loan modification or forbearance. Some lenders will pause foreclosure proceedings while reviewing a modification request, but this is not may provide. The sooner you contact them, the better your chances.

Can I refinance to get rid of the deferred amount?

Possibly, but not automatically. Refinancing requires you to may have access to for a new loan, which means your credit score, income, and home value all matter. The deferred amount becomes part of your loan balance, so you'll need enough equity to refinance without owing money at closing. Ask your servicer what your refinance options are before the plan ends.

What if I can't afford the payment when the plan ends?

Contact your servicer at least 30 days before the plan ends. Explain your situation and ask about another modification, forbearance, or other options. Lenders prefer to work with you before you miss a payment, so don't wait until the new payment is due. Have a realistic plan to show why you'll be able to pay this time.

Does a Capitol Payment Plan hurt my credit more than missing a payment?

No. A modification lowers your score, but missed payments cause more damage and stay on your report longer. A modification shows you worked with your lender to avoid default, which is better than the alternative. Your score will recover faster from a modification than from missed payments.

Can I sell my home while I'm on a Capitol Payment Plan?

Yes, but you'll owe the deferred amount at closing. The sale proceeds will pay off your entire loan balance, including the deferred portion. If your home has appreciated, this won't be a problem. If you're underwater or have little equity, the deferred amount could eat into what you'd otherwise walk away with.