Mortgage Payment Holidays - what you need to know

  • 25th March 2020

Banks have agreed with the Chancellor that they will offer mortgage payment holidays for those struggling financially from the impacts of Coronavirus.

For many this will be a welcome relief, but it would be wise to remember that this is only a temporary break.

The mortgage payment holiday has been introduced to allow lenders to offer a three month break, either by stopping mortgage payments or arranging payment reductions during this period. We would advise that you consider this carefully before deciding on this option as it will not be a suitable option for everyone. This is not free money and you will be required to pay this back after the payment holiday.

What do you need to do

Firstly, contact your lender. The payment holiday is a voluntary arrangement so it is not compulsory for your lender to offer this. In addition not everyone will be granted a payment holiday. Most lender have a link specifically to apply for a mortgage holiday so this should be your first port of call. This should be a fast-track approval process so you should find out very quickly whether your request has been approved. It is worth double checking with your lender that this holiday will not affect your credit rating.

Most lenders will have set criteria that you will have to satisfy before they will consider your payment holiday application. These may be to ensure:

  • your finances have been affected by coronavirus
  • you are up to date with your monthly mortgage payments and not in arrears
  • you have consent from everyone named on the mortgage

Repaying your deferred payments

Your lending is likely to spread the cost of the deferred payments over the outstanding term of your mortgage which will lead to an increase in your monthly payments. Needless to say, the shorter you have left on your mortgage, the higher the increase in monthly payments will be so. Do ensure you have spoken to your lender and are comfortable with your revise repayment terms.

Buy to Let Mortgages

The same eligibility will apply as above but you will also be required to confirm that your tenants are having difficulty paying their rent due to Coronavirus.

Other considerations

Lenders can currently only offer a three month payment holiday, therefore it is important that you look at applying sooner for this at the right time for your personal situation. It is also important that you apply quickly if you fear that your mortgage may fall into arrears.

Please do be aware that if you are coming to the end of a mortgage product or tie in period, then you will not be able to switch your mortgage to another preferential product whilst on a payment holiday.

If you have been making ‘overpayments’ on your mortgage, your lender may allow you to ‘under-pay’ on future monthly mortgage payments up to your overpayment reserve.

Personal Protection

It is critically important that you try to keep your existing protection plans. There is the potential that future protection policies could have exclusions in place for not only COVID-19 but also air borne viruses.

Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.

Information contained within this article is not a personal recommendation of Forrester Boyd Wealth Management. The wording in this article is not to be construed as an offer or advice. We recommend you seek advice concerning suitability from your investment adviser.