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    MORTGAGE PAYMENT HOLIDAYS – WHAT EXACTLY DO THEY MEAN FOR ME?

    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.

     

    Most lenders have stated that they will abide by it and are willing to be able to look after their borrowers during this unprecedented period, but there is not always consistency or clarity.

    There are also a few important things to consider which could save you some despair in the months ahead.

    We have taken the time to find out as much of the information as possible to keep in touch with lenders as they implement their response.

    What is a Mortgage Payment Holiday?

    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 announced 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.

    1
    What is the Government Proposal?

    The full proposal is in detail below:

    • Mortgage lenders will automatically offer a 3-month mortgage payment holiday for its customers who are impacted, directly or indirectly, by COVID-19
    • The mortgage payment holiday will apply to those who are up to date on their payments, not customers in arrears and wanting to self-certify that they are impacted by COVID-19
    • It means that lenders will not use an income and expenditure assessment
    • It will also allow lenders to be responsive to customer and their needs It will offer forbearance in a simple way to their customers
    • Customers will be made aware of the fact that the interest will accrue in the holiday period and they will have to make up the payments deferred in the future
    • Customers who wish to undertake a full assessment of their ability to pay or financial difficulty may still do so.
    2
    Mortgage Payment Holidays: How do I apply?

    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:

    • the customer would contact the lender and inform them that they are impacted by COVID-19
    • the lender will accept details from the customer and offer an automatic 3-month mortgage payment holiday
    • no evidence will be sought from the customer
    • the lender makes the customer aware that interest will accrue and will be contacted at the end of the three months to complete an assessment of the customer’s circumstances
    • at the end of three months, an arrangement to pay will be agreed with the customer according to their circumstances to recover any shortfall, while ensuring that the mortgage remains affordable and sustainable
    • the lender lets the customer know that if they wished to complete a full assessment now, there may be other forbearance options more suitable to the customer.
    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 make a note of 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 may could remortgage onto an offset basis could give them 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