Many people will be concerned that their incomes will reduce or that they could lose their jobs altogether as a result of the coronavirus pandemic and may be worried about paying their mortgages.
The Government has announced that homeowners struggling with mortgage costs may be able to claim a three month “holiday” from their payments. Here’s what you need to know about how mortgage payment holidays work and who’s eligible.
What is a mortgage payment holiday?
If you qualify for a mortgage holiday, this effectively means you’ll be able to take a break from your mortgage payments, which could prove invaluable if you’re finding it difficult to make ends meet.
However, this doesn’t mean that your lender will simply cover your mortgage payments for you. Instead, they will defer your payments so that there is no need to make a payment but interest will continue to be charged and added to the mortgage account. As a result you may have to make slightly higher monthly repayments when your mortgage holiday ends.
Who’s eligible for a mortgage payment holiday?
To qualify for a mortgage holiday, you must be up to date with your payments and not in arrears.
Mortgage payment holidays are usually only offered to those who have lost their income temporarily rather than permanently. A spokesman for trade body UK Finance said; “This is not a solution where, because of a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments and there is little prospect of an improvement in the situation in the foreseeable future.”
If you’ve already missed one or more mortgage payments, or you’ve been made redundant or lost your job, get in touch with your lender as soon as possible as there may be other options available to you. For example, these might include switching to a different rate, moving your mortgage from a repayment to an interest-only basis, or lengthening your mortgage term to reduce your monthly costs.
Can I get a mortgage holiday if I have a Buy to Let mortgage?
Yes, landlords can also request a mortgage payment holiday for up three months if their tenants are struggling to pay their rent due to the coronavirus.
If tenants are still finding it difficult to meet rent payments after this three-month period, landlords may need to work with them to find an affordable repayment plan.
The Government has acted to provide greater protection for tenants during the pandemic and landlords will not be able to start eviction proceedings for at least the next three months.
How do I go about arranging a mortgage holiday?
You’ll need to contact your lender if you think you’re going to need a mortgage payment holiday, or if you want to discuss other options. Bear in mind that lenders are exceptionally busy at the moment, so it may take you longer than usual to get through so look online first.
Most lenders are now posting information on their websites to help customers concerned about the impact of coronavirus on their ability to make their mortgage payments. Some are developing online forms to apply for the mortgage payment holiday.
It’s crucial to speak to your lender and whatever you do, don’t cancel your mortgage direct debit. Lenders are stating that there will be no impact on credit profiles for those that have a mortgage payment holiday formally agreed.
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