Head of Content
Mortgage Advisor & Director
What is a mortgage payment holiday?
A mortgage payment holiday is where you elect to break in your mortgage repayments, typically for up to three months. Mortgage payment holidays are also called mortgage deferrals, as while payments cease, the loan continues to attract interest.
If your financial situation has been affected by COVID-19, but you have not yet taken a mortgage holiday, you can apply up until the 31 October 2020. The initial period is up to three months; however, you may apply to extend to six months if you are still experiencing difficulties at the end of the three months.
In normal circumstances, you will need to provide evidence or have an affordability test, however for difficulties related to COVID-19, these requirements have been waived with many lenders offering quick online applications.
Who can get a mortgage payment holiday?
For COVID-19 related mortgage payment holidays, both residential and buy-to-let properties qualify, with additional financial support available to landlords.
Will mortgage payment holidays be extended?
The current deadline for COVID-19 related mortgage holidays is the 31 October 2020. Anyone who is having a mortgage payment holiday can apply to extend for an additional three months.
How much will my mortgage increase with payment holiday?
If you have a mortgage payment holiday, your mortgage payments will increase once you start making repayments. This is to account for the additional interest built up over the mortgage holiday.
There are a few of factors to consider when considering repayment options:
- You may be able to increase the length of your mortgage term to counteract increased monthly payments. This means you will pay your mortgage over a longer period, and as such incur more interest, but your monthly payments will be lower.
- You could look at paying partial payments during the mortgage holiday to reduce the increase. Making either interest only or capital only payments will reduce the total borrowing in comparison to not making payments.
How to extend mortgage payment holiday
Contact your lender and tell them you are experiencing payment difficulties due to COVID-19, you can extend for up to three months.
Will having a mortgage payment holiday affect my credit score?
While having a mortgage payment holiday authorised by your lender will not impact on your credit score, it may impact on your ability to get a mortgage in the future.
This is because by taking a mortgage holiday, you are admitting that you are in financial difficulty with some lenders looking on this unfavourably. Lenders may ask if you have taken any mortgage breaks in the past and may impact on their lending decision.
Can you cancel mortgage payment holiday?
Yes, you can cancel a mortgage payment holiday if you no longer need it. Contact your mortgage provider, and they will inform you of your new monthly repayments and arrange repayments to recommence.
How can I learn more?
At Teito, we are proud to support our customers through difficult times. Our experienced advisors can help you to decide on the best course of action with a mortgage payment holiday, get in touch today.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
