Mortgage lenders over the last couple of days have set out how they will provide payment holidays for up to three months for those who are financially affected by Coronovirus (COVID-19).
Mortgage payments are often the largest outgoing for homeowners and lenders want to reassure them that they are working towards measures to support them during this very difficult and uncertain time – especially as we don’t know how long this may go on for.
If you are concerned about your current financial situation, we can help. We can talk to you about any implications a mortgage payment break could have, liaise with your lender or inform you of what you need to ask them when you do speak to them.
In the meantime, here’s a brief guide to taking a mortgage break: BLOG
Taking a Mortgage Payment Holiday
A mortgage payment holiday means that your mortgage repayment is deferred for a set period of time during which you won’t make any repayments. Interest will still accrue whilst you are on your mortgage payment holiday.
You may want to take a mortgage payment holiday due to a shortfall of income that you believe is a temporary situation. This isn’t a permanent solution because you will need to carry on making your full mortgage repayments once this period is over – usually three months. The shortfall will be made up in the future, which could be over the remaining term.
How does it work?
While you take a mortgage holiday, the capital sum of the loan remains the same while the interest accrues. At the end of the payment holiday the rules re-apply and your lender will assess your circumstances and come to an arrangement regarding repayment of the arrears. Any arrangements will minimise the risk of repossession.
Will there be a blanket repayment holiday?
At this point in time lenders are helping people on an individual basis so an automatic payment holiday for all customers isn’t necessary as not all customers will be unable to meet their repayments.
Will it affect my credit score?
Lenders have stated that because of the very unique circumstances we are facing due to COVID-19, they will be talking to credit references agencies to ensure that it will not impact their credit score. However, we advise that you check with your lender before making the decision to take a mortgage break. Each lender has a different approach for reporting to credit reference agencies, but they have made assurances that a repayment holiday won’t result in an adverse impact on your score.
How do I apply?
Lenders are offering customers who are up-to-date with their mortgage payments and impacted by COVID-19 the ability to self-certify. Usually, a lender will assess your individual finances and consider what options are suitable. However, with the sheer volume of people asking for help they have waived this for a more straightforward process.
If you believe that you have been impacted by COVID-19, talk to your lender at your earliest convenience to find out if this is a suitable option. At The Mortgage Hub we can help you so get in touch if you would like advice on applying to your lender.
Am I eligible?
If you have been in arrears with your mortgage repayments and aren’t up to date, the Financial Conduct Authority (FCA) rules state that lenders must ensure that any forbearance offered enables recovery through full repayment of arrears, minimises the long-term impact of arrears, and that the mortgage remains affordable and sustainable in order to ensure that your home won’t be repossessed in the future. That’s why payment holidays are a short-term solution and will not be offered if you aren’t currently up-to-date.
We advise that you contact your landlord or managing agent if you are worried about meeting your rental payment. Your landlord may be able to talk to their mortgage lender to discuss the options which could allow you to take a break in payments.
Get in touch if you’d like any advice. We’re here to help.