One of the measures the government has introduced to help the public through the current crisis is mortgage payment holidays, which are meant to provide borrowers with repayment flexibility. Around 1 million borrowers have already taken advantage of mortgage holidays. But are they right for everyone?
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
All mortgage providers are now required to offer the option to reduce or cease monthly payments for up to three months.
If it appears to the bank that you’re still earning, you might be rejected. In this case, there are alternatives that your lender might offer to reduce the strain of your repayments, so be sure to review your options before applying for a mortgage holiday.
Britain’s biggest mortgage lender, Lloyds Banking Group, has said they have already approved more than 300,000 payment holidays.
How do mortgage payment holidays work?
Once you’ve spoken to your lender and applied for a break, there will be a fast track approval process to ensure you get a quick answer.
Unfortunately, it’s not exactly a free ride — you will still owe the money and interest from the payments that you’re being granted a temporary respite from. However, there should be no additional penalties and it should not affect your individual credit rating.
Each lender will be following their own specifications, but potentially at the end of the three month period, the amount you accrue will be added onto your total, your monthly payments will increase, and you just add three months on to your repayment terms.
With the current low interest rates on the market, the additional cost is marginal. So, if you really can’t afford payments over the next few months, a mortgage holiday is definitely the better choice.
Making your decision
If you’re interested in suspending your mortgage payments during the height of the outbreak, contact your lender to let them know that you’re having difficulty making payments because of the coronavirus.
As so many mortgage holders currently see it as a viable option, demand might surge, so if you plan to apply for a mortgage holiday, act quickly.
The Money Advice Service can also provide some up-to-date guidance on payment holidays.
If you are considering a payment holiday, speak to your mortgage lender as soon as possible. If your mortgage is through Dental & Medical Financial Services, contact us and we can discuss the right option for you.
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