Common questions about mortgage holidays

June 10, 2021
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Homeowners rarely expect help from the government with their mortgage payments, but unprecedented times call for unprecedented measures. In March 2020, the Chancellor of the Exchequer, Rishi Sunack, announced that UK lenders would be offering mortgage holidays to help those unable to work due to the Coronavirus pandemic.

Payment holidays may sometimes be requested as part of your mortgage deal, but they are rarely offered on this scale. Households struggling with meeting their mortgage payments are able to apply for a three-month pause on their mortgage payments.

This is on top of other generous support schemes, including the furlough scheme and Self Employed Income Support Scheme. Under the furlough scheme, the government will pay 80% of wages for individuals unable to continue doing their job. And the Self Employed Income Support Scheme gives grants to the self-employed to help replace lost income.

What is a payment/mortgage holiday?

A mortgage holiday does not mean that the government will pay your mortgage for you, it simply means that lenders won’t ask for payments for a few months.

Will I still pay interest if I choose to use the mortgage holiday scheme?

You won’t pay anything during the mortgage holiday, but the missing payments will need to be taken into account when calculating the remaining mortgage. If you have 10 years and 3 months left on your mortgage and you take a payment holiday for three months, your remaining payments will need to increase, unless you also increase the mortgage term.

Increasing the mortgage term will mean higher interest payments in the long term. If taking a mortgage holiday would make your new monthly payments unaffordable, you will have to speak to your lender about increasing the term.

Does this impact my credit score?

Under normal circumstances, a mortgage holiday would impact your credit score as the payments will not appear on your payment history. However, lenders have confirmed that taking this payment holiday will not impact your credit score.

If I have had a payment holiday in the past, can I have another one?

Yes, if you have taken a mortgage holiday in the past, you will still be eligible for this one.

What should I do if I’m not struggling at the moment, but I could be in the future?

You should continue to make your mortgage payments for as long as possible. If you suspect you might run into trouble in the future, speak to your lender to find out the next steps. Taking a mortgage holiday should be used as a last resort, as it will increase the total amount you have to repay over the lifetime of the mortgage.

Is the mortgage holiday scheme open to everyone?

You have to be struggling financially to take advantage of the scheme. You also need to be up to date with your mortgage payments. If you have fallen behind before the scheme opened, speak to your lender.

Can I apply for a mortgage holiday on multiple properties?

Yes, provided you are struggling financially. You can apply for a mortgage holiday on all of your properties if they are with different lenders. If your mortgages are with the same lender, you will need to speak to them about this arrangement.

Can I apply for a mortgage holiday with a joint mortgage?

This will all depend on your individual circumstances. If only one partner has lost their job or is unable to work, your lender might determine that the remaining income is sufficient to make the payments. You may need to provide more information for the affordability checks.

Can I apply for a mortgage holiday when in arrears?

This will depend on your lender. Lenders will take each application on a case-by-case basis, so you may be able to apply to give you some breathing room.

Can I take a payment holiday on my Help To Buy Equity Loan?

If you took out your Help to Buy Equity Loan before 31st March 2015, then you will be able to apply for a payment holiday. There is a range of options to help you defer payments available, so speak to your lender to find out more.

When can I apply for the payment holiday?

You can apply for a payment holiday as soon as you start to struggle financially. The sooner you speak to your lender, the sooner they will be able to help you.

How do I apply for a payment holiday?

Applications go through your lender, so you will need to refer to their website to find out more. Many lenders have created fast-track application links to help make the process easier.

When does the mortgage holiday start?

This depends on your circumstances and your lender. If you leave it too late, you may need to wait another month to start your holiday. Speak to your lender as soon as you feel you might struggle so they can arrange a date that works for you.

Can I choose when my mortgage holiday starts?

Yes, most lenders are happy to accommodate these requests. Remember that any payment holiday will increase your total repayments, or increase your repayment term, so think carefully before choosing to start a payment holiday.

Will there be affordability checks?

If you are planning to increase your mortgage payments or make changes to your repayment term, this will require affordability checks. Lenders will also want to know about changes to your household income that will impact your ability to make mortgage payments.

Lenders will want to see bank statements that confirm you are unable to make repayments. You may also need a doctor’s note to prove you have had coronavirus or a redundancy letter from your employer. If you are self-employed, you may need to confirm cancelled contracts.

Is there an alternative to a payment holiday?

Some lenders are offering the option to switch your mortgage to interest-only for 12 months. This will greatly reduce your mortgage payments while still allowing you to keep up with your interest payments.

What happens at the end of the mortgage period?

At the end of the mortgage holiday, your payments will continue, but they may increase slightly to make up for the payment holiday. Speak to your lender to make sure you know what you need to do at the end of the repayment period. Every lender will have its own procedures.

If payment holidays are extended by the Government, will my payment holiday be extended?

This all depends on your lender. Some will extend them automatically while others will require you to opt-in or opt-out of an extension. Lenders may want to review your circumstances before granting an extension.

What if my circumstances change while between a mortgage offer and completion?

Every lender will look at each application in turn, so there is no way to know if your mortgage offer will still stand. A lot can change between securing a mortgage offer and signing on the dotted line, and it’s important to keep your lender in the loop with any changes to your circumstances.

Can renters apply for a payment holiday?

There is no equivalent scheme in place for renters and you will still be liable for rental arrears. You should speak to your landlord to arrange a payment plan that works for both of you.

What can landlords do if their tenants cannot afford rent?

Buy-to-let mortgages are also eligible for a payment holiday, so you may be able to get a three-month payment holiday to ease the financial strain. Speak to your lender for more information.

My lodger can’t afford to pay rent, but I don’t qualify for a mortgage holiday, what can I do?

If you are in a situation where your rental income is not factored into your mortgage repayments, there isn’t much you can do in this situation. You could ask your lender to switch your mortgage to an interest-only repayment model to make it easier to make repayments.

What happens if I can’t pay my protection policy?

Speak to your lender as soon as you feel you are unable to keep up with your payments. They will be able to advise you on the next steps.

Next steps for borrowers

If you are struggling financially, always get in touch with your lender as soon as possible. Remember that payment holidays are a short-term solution, so only use this option if you expect your financial situation will improve during the term of the holiday.

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