Mortgage payment holidays

What's a mortgage payment holiday?

This is when your lender lets you take a break from making your mortgage repayments. It’s designed to relieve some financial pressure in the short-term, typically three to six months.

You can’t simply cancel your direct debit if you’re struggling to pay your mortgage - instead, you’ll need to speak to your lender in advance and agree a payment break with them.

Some lenders also allow partial payment holidays which can help your cash flow by temporarily reducing your monthly repayments.

Do I qualify for a mortgage payment holiday?

The conditions for repayment holidays vary between lenders and depend on the type of mortgage you have and your financial circumstances.

Often, to qualify for a mortgage break, you’ll need to have overpaid on your monthly repayments in the past for a certain amount of time.

Some lenders will want you to have had the mortgage for at least 12 months and to owe less than 75% or 80% of the mortgage amount.

However, you won’t qualify for a mortgage break if you’re in arrears. In other words, if you’ve already missed payments.

Pros of a mortgage holiday

• It can relieve the pressure for a while if you’re going through financial difficulties
• It can help when there’s a short-term reduction in your income, such as redundancy
• You can avoid falling into arrears which would have a big impact on your credit score
• You have more flexibility with your finances when you need it most

Cons of a mortgage holiday

• It isn’t a long-term solution and you’ll owe more on your mortgage in the long run
• You’ll still pay interest each month even though you’re not making payments
• Your repayment costs may end up being higher once the payment holiday ends
• It’ll go on your payment history and may affect your chances of getting future credit

How to apply for a mortgage holiday

If you want a break from making your mortgage payments you’ll need to check the terms and conditions of your mortgage first and speak to your lender.

Some lenders have online applications for mortgage holidays so it’s a good idea to check their website.

Alternatively, if your lender has a high street branch, you can try arranging a face-to-face appointment. Or consider phoning your lender to find out if a payment holiday is the right option for you.

You’ll need to explain why you want to take a break from your payments and be honest about your circumstances so your lender can give you the right advice.

What happens when your payment holiday ends?

When your payment break comes to an end, your lender will contact you to agree the arrangements for you to start repaying your mortgage again.

Once this is done, you’ll usually receive a letter which will tell you your current balance, what your new monthly payment will be and when your first payment is due.

If you’re still struggling to cover your repayments, you can discuss this with your lender.

You may be offered alternative tailored solutions, like partial monthly repayments or extending your mortgage break, but this is likely to affect your credit rating.

Coronavirus and mortgage payment holidays

Lenders have been encouraged to help customers struggling to make their mortgage payments during the pandemic with a range of different options, including payment holidays. 

If your coronavirus mortgage payment holiday has ended and you’re still struggling, it’s important to let your lender know as soon as possible. They don’t want you to fall into debt and can help you draw up a plan that works for both parties.