Your ABC Guide to Mortgage Payment Holidays

As we continue through this time of uncertainty – data from UK Finance shows that since the Chancellor announced mortgage payments holidays:

Over 1.2 million homeowners have taken it up.

Under this new policy homeowners can request a deferral of their mortgage payments for up to 3 months, providing potentially much needed help to those who are experiencing hardship because of COVID-19.

However, it is important to note that this will not be the best option for everyone and, most importantly, it isn’t ‘free money’. If you are in a position to continue to make your repayments as normal, this would be the best option for you, but if you would benefit from this mortgage payment holiday then here are a few important points for you to know.

Don’t Cancel Your Payments

It is vital that you do not cancel your direct debit. A cancellation of your DD will be considered a missed payment if it has not been agreed with your lender, and could show up in your credit file – potentially impacting your ability to obtain future remortgage or finance products. You must go through the application process and ensure everything has been approved with your lender before anything.

Do Your Application Online

While we are all understandably in need of reassurance at this time, particularly that can come from speaking to someone on the phone – unfortunately lenders are struggling to process that volume of calls that these changes to how we are living have created. Save yourself the time and frustration of trying to get through to your lender on the phone and complete an online application through their website.

Fast track approvals have been put in place and there is no evidence to provide or means test – so you should receive a quick decision. While you will most likely have to repay any unpaid interest, there shouldn’t be any additional fees or charges and your credit rating should remain unaffected.

It’s Not For Everyone

While a mortgage payment holiday can be an ideal short-term solution for those experience financial stress during this period, it is important to understand that it isn’t going to be the best solution for everyone and carefully consider your options before applying. Especially noting that:

1. It will not be a suitable solution if your household income has been permanently reduced. If this is the case, please get in touch with us for a full review of your circumstances and advice on the best way forward.
2. While your mortgage payments are on a break, you’re still going to incur interest on the outstanding balance. You’ll still owe the same amount but with added interest. This does mean it will take longer and cost you a little more to pay off your mortgage.

For a better understanding of the impact that a payment holiday will have on your mortgage check out this Mortgage Holiday Payment Calculator. This will give you an outline of the increased amount and / or number of mortgage payments you’ll need to make once your payment holiday is over.

It is so important that you understand the impact of a mortgage payment holiday on your future repayments. If you have any questions, queries or concern we at ABC Mortgages are here for you.

Contact us today to discuss this or any of your mortgage needs.

As always, we hope this helps! For more information on how ABC Mortgages can help you with your mortgage needs you can contact us through the information below.

Thanks,
Bill Muir
ABC Mortgages