What is a mortgage payment holiday?
You can no longer apply for a coronavirus mortgage payment holiday. But, if you meet certain conditions, you might still be able to get a mortgage payment holiday.
A mortgage payment holiday is an agreement you might be able to make with your lender that allows you temporarily to stop or reduce your monthly mortgage repayments.
For example, depending on your circumstances and previous payment history, you might be able to take a break for usually up to six months:
Not all mortgages offer the option of a mortgage payment holiday – it depends on the product’s terms and conditions.
Qualifying for a mortgage payment holiday
Whether you qualify to take a payment holiday, for how long, and the conditions you must meet first will depend on:
- your lender
- the mortgage contract, and
- your financial circumstances.
Often, to qualify for a payment holiday, you’ll need to have previously overpaid your mortgage.
That means paying more than your agreed monthly payments until you’ve built up enough credit to take a break from payments.
However, your lender might also allow you to reduce or suspend mortgage payments if you’re temporarily struggling to meet the monthly cost due to a change of circumstance, such as redundancy or going on maternity leave.
If you’re in mortgage arrears you won’t qualify for a mortgage payment holiday.
But don’t let that stop you contacting your lender. They’ll be keen to help you come to an arrangement.
Pros of a mortgage holiday
- The biggest positive about a payment holiday is that it relieves some pressure for a while.
- For a while, you have one less thing to worry about when considering your outgoings.
- If you’re only facing a temporary drop in income, perhaps because you or your partner are having a baby and the mortgage holiday is to cover the maternity leave period, this can be a sensible move.
Cons of a mortgage holiday
- While a mortgage holiday can be a useful short-term solution, it’s not suitable if you can’t afford your mortgage payments because your household income has reduced permanently.
There are several important things to bear in mind:
- While you’re not making mortgage payments, you’re still racking up interest on your remaining mortgage balance.
- When the payment holiday ends, your outstanding mortgage balance and mortgage payments will be higher than they were before the holiday.
- Even if your lender agrees to this temporary solution, your credit file will be affected. This could affect your ability to get credit in future.