What is a Mortgage Payment Holiday?
Posted on 23rd March 2020
Mortgage payments are, for many, one of the biggest monthly outgoings our valued clients make. Our Preston solicitors have, therefore, been investigating the options available to those who may be struggling, given the current uncertainty we are all faced with. One major aid, on which guidance is developing daily, relates to mortgage payment holidays.
What is a Mortgage Payment Holiday?
As it says on the tin, if accepted, this allows monthly mortgage payments to either be suspended, or reduced, for a period agreed by the lender, dependent on their specific requirements. Whilst the scheme does not work to provide borrowers with free money, the repayments required each month can temporarily be reduced or stopped. This is not an arrangement that all lenders support and, as such, you should check with your individual lender as to whether this option is available and something they offer.
How do I apply?
Usually, in order to qualify for a break in mortgage payments, lenders will require that you have previously overpaid on your mortgage. This, in effect, works as building up credit on the mortgage which will allow for a break to be taken.
This is not the be-all-end-all, however, as lenders can agree that payments can be temporarily be reduced to allow for a temporary change in circumstances such as maternity leave or redundancy. If you have previously failed to meet monthly payments, or are currently in arrears on your mortgage, the lender will be unlikely to grant the payment holiday.
You should, in the first instance, contact your mortgage lender and make a request for the payment holiday. Individual lenders criteria will vary, however, in light of the current pandemic we face, UK Finance have confirmed that most are now imposing a ‘fast track’ option, which will allow for the request to be processed quicker, and those in need to be aided sooner.
Ultimately, the decision of the lender is based upon your financial circumstances and, in any event, the type of mortgage and agreement you are currently in with your lender.
How does the Payment Holiday work?
Payment holidays work in different ways for different lenders; some may choose to add the repayments on at the end of the term of your mortgage, however, some may spread the outstanding payments out over the outstanding term of the loan. This is an issue that lenders have not made a clear proposal on yet, however, it is expected that over the coming weeks, further guidance will be provided.
Most lenders will only allow for one mortgage payment holiday, over the whole term of the mortgage, however, in these trying times, lenders are being urged to cooperate and help assist those in need.
It is, in addition, important to note that interest will continue to accrue throughout the period of the break. The holiday should not be considered to be free money, however, a short term method of assistance to those in need.
You should, therefore, always take the advice of your mortgage advisor, before making any decisions about your mortgage. You should also be vitally considering how the same may go on to affect your ability to meet monthly repayments, should the same be subject to increase following the mortgage payment holiday. Your mortgage broker will, of course, be able to advise you accordingly on the best options available for you.
Further news and guidance on the matter is being released daily. Follow our Preston solicitors blog for the latest updates from lenders and their proposals to help those in need.
Our solicitors in Preston understand that this is an un-nerving time for many, however, please be assured that our Preston solicitors have the appropriate measures in place to ensure that your conveyance can proceed as smoothly as possible. If, therefore, you have a conveyancing query, or would like to speak with a member of our expert team for a fixed-fee conveyancing quote, get in touch today at firstname.lastname@example.org.
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