Mortgage Payment Holidays has become the biggest topic in the mortgage market since the announcement of Governments promise that all borrowers will be able to have a three-month mortgage payment holiday if they need it.
For all Mortgage Payment Holidays, we would suggest speaking to your mortgage adviser and not just assume automatically to take a holiday if the situation is not pressing. Lenders will be overloaded with calls and should be free to deal with the most urgent first.
We will help you with your questions and see if there are any other options available to you.
For a customer, up to date with payments, not in arrears and impacted by COVID-19:
To simplify it, a mortgage payment holidays is an agreement entered into with your bank, mortgage lender or building society to defer monthly mortgage payments for a set period. In this case of the government announcement it is 3-months.
This does not mean you will never have to pay back the amount, but the interest you defer will be added back onto your loan amount whilst the total capital balance will not decrease. Basically, your mortgage amount will slightly increase, and the interest will continue on the whole amount.
Mortgage Payment Holidays are available both for those with mortgages, this means landlords also have assistance if it affects rental payments.
Mortgage Payment Holidays – Will it affect my Credit Score?
Usually, mortgage payment holidays show up on your credit score as a negative mark, but most lenders have now said that for cases linked to the virus they will ensure that this does not happen.
It is important you ask this question to your lender directly and record the response this will include the date and the name of the person you are speaking to avoid confusion later. Different lenders will do different things.
What “Other Options” are available?
There are some other options available, some lenders are offering a temporary switch to interest-only in order to reduce the monthly payments.
It may not be that necessary to convert all your mortgage payment to interest only and it may be the case that placing part of the mortgage on this basis could give you some needed breathing space.
Customers with savings could remortgage onto an offset basis could give them a help by reducing their monthly payments whilst keeping their savings in place.
For example, someone with a £500,000 loan and £100,000 in savings would only pay interest on £400,000 reducing their payments accordingly.
To talk about any of these options, or to just have a helpful chat about your current situation please contact us here…