Mortgage payment holidays
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Mortgage payment holiday – is it right for you?
If you are considering taking a mortgage payment holiday, your circumstance needs to be considered before knowing whether it is right for you.
With the banks receiving 10,000’s of requests a day for mortgage payment holidays, they are struggling to cope with the demand. We have therefore decided to help our local community and existing customers by answering your questions and being there for you at this unprecedented time.
So, what is a mortgage payment holiday?
If you take a mortgage payment holiday, this means that you won’t make mortgage payments for up to three months and the lender will add the accrued interest onto your mortgage balance.
As a result, your mortgage balance will increase, and your monthly payment will typically be recalculated over your remaining mortgage term. Your monthly payment and the amount of interest you pay will increase for the remaining term of your mortgage.
It certainly isn’t right for everyone.
Mortgage payment holiday – is it right for you?
If you are considering taking a mortgage payment holiday, your circumstance needs to be considered before knowing whether it is right for you.
With the banks receiving 10,000’s of requests a day for mortgage payment holidays, they are struggling to cope with the demand. We have therefore decided to help our local community and existing customers by answering your questions and being there for you at this unprecedented time.
So, what is a mortgage payment holiday?
If you take a mortgage payment holiday, this means that you won’t make mortgage payments for up to three months and the lender will add the accrued interest onto your mortgage balance.
As a result, your mortgage balance will increase, and your monthly payment will typically be recalculated over your remaining mortgage term. Your monthly payment and the amount of interest you pay will increase for the remaining term of your mortgage.
It certainly isn’t right for everyone.
3 simple tips to help you make the right choices
Tip 1
Tip 2
Don’t take a payment a holiday if your mortgage is within 5 months of the end of your current product without seeking expert advice. You may find yourself adversely impacted with your remortgage options and moving onto the lenders higher standard variable rate if you do.
Tip 3
If you have decided to take a mortgage payment holiday… just in case, make sure you save the money and don’t spend it. When normality returns you may consider overpaying your mortgage or perhaps clearing a higher interest credit card or loan.
Make the right decision – have a 5-minute chat with an expert today 01273 736536
What you need to know…
Will I still be able to remortgage or take a Product Transfer with my lender?
This is probably the most controversial element that has emerged over the last few weeks. There is now plenty of evidence to suggest that it can impact on a product transfer and remortgage if you choose to take a mortgage payment holiday.
If you take a payment holiday and are approaching the end of your current mortgage product you may be forced to move on to the higher lenders standard variable rate. This could mean you will pay more interest than you may need to the bank or building society.
If your mortgage is within 5 months of the end of your current mortgage deal, we highly recommend you speak with an expert mortgage adviser first to determine the best course of action.
Furthermore, it may impact on the mortgage loan to value of property ratio which may mean you secure more expensive interest rates for your new remortgage or product transfer.
My income has reduced will I still be able to remortgage OR do a product transfer?
Probably, it is likely we can secure a product transfer with your existing lender without any need for proving your income. If you are concerned or just want to know for sure…. it will be best for you to chat over your situation with an independent mortgage expert to discuss your options.
We won’t charge any fees for product transfers with existing lenders if you have been directly or indirectly financially impacted by the Coronavirus.
Will taking a mortgage payment holiday impact my credit profile?
If arranged correctly, it shouldn’t impact your credit profile. What you must NOT do is simply stop making payments without speaking to your lender. If you do this, you will go into arrears and this will adversely affect your credit file which could prevent you borrowing in the future.
We have guidance with each lender however it is best to contact the lender to confirm if mortgage payments holidays will affect your credit profile.
How do you apply for a mortgage payment holiday?
For all mortgage payment holidays, we recommend chatting to an expert mortgage adviser in the first instance. Do NOT automatically look to take a mortgage holiday if the circumstance isn’t urgent. Lenders are struggling to cope with calls and need to be left free to manage the most urgent cases first.
We will help go through your situation and see if a mortgage payment holiday is right for you.
But going back to the question ‘How do you apply?’, you will need to either call the lender OR complete online forms. Call us on 01273 736536 and we can provide the online forms OR contact numbers.
Will I be able to make an overpayment later on?
With most lenders you will be able to overpay your mortgage by up to either 5-10% of the mortgage balance in each year without penalty. If you are taking a mortgage payment holiday just in case your situation changes, it will be sensible to save the money, and when normality returns you can consider whether to keep the money for a rainy day, overpay the mortgage or pay off higher interest rate credit cards or loans.
How will the ‘mortgage holiday’ impact me later on?
You will have an increased payment on your direct debit to account for the mortgage remaining the same and interest being added to the mortgage during the payment holiday.
It may also impact on your ability to secure the best mortgage deal when you come to the end of your current mortgage arrangement. This is because you will have a higher mortgage loan to property value ratio and also lenders looking to lend to new customers are starting to ask why mortgage payment holidays were required.
Will a three-month mortgage payment holiday be enough?
It is unknown how long the world will take to recover from the Coronavirus pandemic, it is therefore challenging to say whether the three months payment holiday will be enough for you.
We believe the government will encourage lenders to extend the mortgage payment holidays if this is necessary to help the majority of the nation.
If you wish to chat over your circumstance and want your questions answered please contact us.