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Should YOU take a mortgage payment holiday?

Should YOU take a mortgage payment holiday?

Update: November 2020

Mortgage payment holiday schemes have recently been extended by the UK Government. Here’s what you need to know:

  • The deadline for mortgage payment holiday requests has been extended until 31st January 2021
  • You can request a three-month break from payments, with the option to extend this for a further three months, if needed.
  • If you’ve already had, or are currently taking, a three-month payment holiday you can still apply for a further three months.
  • If you have already had six months’ of mortgage payment holidays, but find that you still need support, your lender should arrange ‘tailored support’ for you.
  • While your first six months of payment holiday are not shown as missed payments on your credit file, lenders are still able to find out about them (i.e., by looking at your bank records or outstanding mortgage value) – so it may still affect future credit applications.

May 2020

Is a mortgage payment holiday a good idea? The UK Government is supporting UK mortgage holders with mortgage payment holidays – but is it the right option for you?

Watch as our Bearded Broker Ross Stisi considers the good, the bad and the ugly in this two-minute taster video, so you can make an informed decision. If you’d rather read, just scroll down!

Is a mortgage payment holiday right for you?

The good

Yes, the good is pretty obvious – you won’t have to pay any mortgage payments. The payment holiday window is three months, during this intense period of COVID-19 lockdown. Many people have had their income reduced, perhaps through being furloughed or having reduced working hours – or worse. A three-month mortgage payment holiday could really help to lift some of the pressure.

The UK Governement is backing the availablity of payment holidays. This means that there is no penalty or credit rating impact should you choose to apply.

The bad

Unfortunately, you can’t have the good without the bad. If you take a mortgage payment holiday you have a three month window in which you don’t have to pay any mortgage payments. Your lender will take those three payments and add them on to the debt of your mortgage. This means that your on-going monthly payments will increase slightly. 

This increase will be determined by two factors – the balance of your mortgage, and the remaining term on your mortgage. The greater the balance and the shorter the term, the greater the monthly payment increase. Make sure to discuss this with your lender, so you have a clear understanding of your monthly payments after a payment holiday.

The ugly

While a three-month mortgage payment holiday can really help your short-term financial situation, having to restart payments – and at an increased amount – might feel pretty ugly. But, if you need to take off the financial pressure right now and you can afford the subsequent increased monthly payments then a mortgage payment holiday can be of real financial benefit.

The verdict?

We wouldn’t recommend taking a mortgage payment holiday if you don’t absolutely need it. If you can manage right now then it could be an option that you keep in reserve, for whatever’s round the corner. However, if a payment holiday is going to make the difference for you right now, and you use it appropriately, then it’s definitely an option for serious consideration.

How do you arrange a mortgage payment holiday?

If you decide that this is the right move for you, or if you just want to find out more, all you need to do is contact your lender. Most lenders now have specific COVID-19 support pages on their websites, and many have set up online applications. Not sure how to contact your lender? An internet search of your lender’s name, ‘payment holiday’ and ‘COVID-19’ should help.

Here to help

We’re passionate about what we do, we’re trusted experts, and we’re here to help if you’ve any questions. After all, we’re all in this together. Email us at info@stisi.co.uk or call us on 0131 510 1240.