This simple calculator will help you understand how your payments will change if you take a mortgage holiday.
A mortgage payment holiday is an agreement between a homeowner and their lender that means no mortgage repayments are due for a set timeframe. The interest is not suspended during this period and will be added to the outstanding balance when the holiday is over.
During the coronavirus crisis, the UK government has allowed anyone with a mortgage to apply for a three-month payment holiday, but exactly how it will work is at the lender’s digression.
Since you won’t be making interest payments for three months, the interest you owe will build up during that time and be added to the outstanding mortgage balance. This means that you will owe a larger amount than before. Mortgage terms aren’t usually extended for payment holidays, so it is likely that you will need to make higher mortgage payments each month.
The government’s guidance states that mortgage payment holidays taken during the coronavirus crisis should not impact the customer’s credit report, but be sure to speak to your mortgage lender and ask them whether they’re taking these guidelines on board.
Yes. You can still apply for a payment holiday if you are behind on your mortgage payments or have certain types of bad credit as lenders are being encouraged to be lenient during the coronavirus crisis. You should speak to your lender about whether a payment holiday is in your best interest and ask them what alternatives are available.
Yes. Mortgage payment holidays have also been made available to buy-to-let landlords whose tenants are unable to pay their rent due to the impact of the coronavirus. Expect your lender to request evidence that your rental income has been impacted by the outbreak.
Simply contact your mortgage lender and tell them you’re considering applying for a mortgage payment holiday, but be sure to discuss all of the possible alternatives with them. For independent advice about coronavirus and mortgages, speak to a mortgage broker.
Many mortgage lenders are offering alternative forms of support, such as waiving missed payment penalties and extending mortgage terms. Other alternatives include remortgaging to a more affordable deal, taking equity release or switching to an interest-only agreement.
Be sure to speak to your lender about all of the alternatives on offer or seek independent advice from a mortgage broker to discuss the best course of action.
This table shows you the monthly and total cost of using a holiday mortgage, calculating the additional interest paid over the duration of your mortgage.
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