Eight questions on the subject of mortgage payment holidays

1. I can’t get through to my lender to apply for a payment holiday what should I do?

As you can appreciate, there are lots of people attempting to contact their lender.  This is causing long delays and frustration around knowing where you stand.

Click here to find out which lenders are offering payment holidays and how you can approach those lenders to get you the quickest outcome.  We will endeavour to update this as the market updates.

2. My current mortgage deal is due to end during the period I will be in a payment holiday, can I secure a new deal?

Given the current climate, a remortgage to another lender may still be an option but it is worth checking with a broker on this.  If you are looking to stay with your existing lender and are in a payment holiday arrangement, we have put together a list of lenders who will look at this.  As you will note a lot of lenders are still to declare whether they would consider this or not and so again it is worthwhile asking your broker if anything has changed.  We will endeavour to continue to update this list:

 3.What happens to my monthly payments when my payment holiday ends?

When your payment holiday ends generally there are two options available:

– Pay off in full the amount you’ve benefitted from during the payment holiday.  For example, if your monthly payments are £1,000 per month normally and you’ve had three months of payments holidays then you would pay off £3,000.  This then means there is no change to your monthly payment

– Allow the payment holiday amount to be added onto your mortgage balance.  As this will increase your mortgage balance and as your mortgage term will have still reduced by three months during the holiday period, your monthly payments will increase.

In both circumstances above and before you enter into a payment holiday your lender will be able to give you monetary figures for the above.

4. Can I be offered a payment holiday of longer than 3 months due to Covid-19?

We have heard the phrase “Whatever it takes” throughout the crisis to date and extending a three month period may not be off the table.  However, there has been no discussion around this yet and so it shouldn’t be relied upon with looking at your monthly budget going forward.  Your broker may be able to walk you through your budget to ensure there is a good plan in place for when any payment holiday ends.

5. I have multiple mortgages, will I be able to seek a repayment holiday on all of them?

This will be down to which lenders you are with, whether they are offering a payment holiday (see above) and the conditions surrounding why you need payment holidays across multiple mortgages.  The situation where this would likely be the case would be where a landlord who has multiple properties and relies on the cashflow for the properties as income.

6. Do I need to actually contact a lender for a payment holiday?  Can I not just cancel my direct debit?

Please do not cancel any direct debits for a financial commitment that is considered a debt; a mortgage, a car loan, a personal loan and credit cards are examples of this.  Lenders have been clear that taking a payment holiday will not effect your credit rating but this is only if they agree to one in the first place.  Cancelling a direct debit on a financial commitment will effect your credit report and the ability to gain further credit or remortgage when this crisis is over.

7. Are there other options other than taking a repayment holiday?

There are other options to taking a repayment holiday on your mortgage.  The main one to highlight would looking at temporarily changing your repayment mortgage to an interest only one.  This will mean you are simply servicing the interest of the mortgage for the time it is on interest only.  Therefore, the debt will not decrease but the term will.  This means when you return to a repayment mortgage, your monthly payments will be higher.  This could be an option that contains less of a “shock” when you return to full payments compared with taking a repayment holiday as above.  This needs to be right for you and you need to be comfortable that in the absence of a repayment vehicle you will need to return to a repayment mortgage at some point.

Details of these facilities vary from lender to lender but you can assume that a lender will only grant this on a temporary basis and after that basis the mortgage will revert back to a repayment mortgage (as before).  Similar to a repayment holiday a lender will be able to lay out what effect this will have on your payments when things do go back to normal.

We have put together a table of which lenders are offering temporary interest only mortgages.  We will endeavour to update this as the market updates.

8. Should I take a repayment holiday even if I don’t need one?

The short answer to this is no.  If you can afford to keep repaying your mortgage as normal you absolutely should for a few reasons:

– There won’t be a payment “shock” that you may experience if you took a payment holiday

– It gives you more flexibility if for example your mortgage deal expires during this crisis or within six months and you want to remortgage to a new lender.  Generally, lenders will not permit you to remortgage to them if you’re in a payment holiday

– There are financially vulnerable people in the UK as a result of this crisis that may not be able to get a repayment holiday in a timely manner as lenders are working with unprecedented demand.  Not asking for one if you don’t need one reduces this demand and therefore increases lenders capacity to deal with those individuals

As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage  repayments

If you would like to discuss your mortgage, our team is always on hand if you have any questions, please get in touch by emailing randal.mclister@condieswealth.co.uk – you can also follow Randal on Twitter, LinkedIn and Facebook.