Mortgage Payment Holidays – Need to knows
Mortgage payment holidays have been in the news a lot since the Corona virus pandemic began, as some mortgage borrowers struggle to meet repayments because of a downturn in their income. According to UK Finance, around 1.6 million mortgage customers (1 in 9) have taken a payment holiday since the start of the pandemic.
What are they?
A mortgage payment ‘holiday’ is a temporary break from making mortgage repayments. Anyone who is up to date on their mortgage payments is eligible to take a payment holiday, including buy-to-let landlords with mortgaged property.
How long do they last for?
Mortgage payment holidays last for 3 months. However, in May the government announced that borrowers struggling to meet repayments beyond then will be able to extend the deferral for a further 3 months. Applicants now have until 31st October to apply.
Does it affect my credit rating?
There had been scrutiny from some that offering a payment holiday may adversely affect the borrower’s credit file. This is not the case…. But lenders have not committed to whether taking a payment holiday will affect a future mortgage application, as an applicant’s credit file is not the only consideration taken into account in a lender’s decision.
What happens to the payments I would have made?
Unfortunately, this is not free. Depending on the lender’s policy, you will make up the missed payments on future monthly payments spread over the term of your mortgage. There will be an increase even if you are extending your mortgage by say 3 months because of the increased interest that will be charged.
Can I still switch mortgage provider?
If you are coming to the end of your current mortgage deal and wish to look at where the best deal is, please get in touch with us before taking a mortgage payment holiday. Most lenders will not allow a re-mortgage whilst you are using a payment holiday.