Payment holidays from your mortgage could help relieve pressure you're feeling during financial difficulties. Find out more.
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.
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.
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.
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.
There are other options that might make your mortgage repayments easier to manage and can help to keep your finances on track.
It’s best to speak to your bank or building society, or a debt advisor, but you may also have the options of:
So that you pay the debt over a longer period, this will reduce your monthly payments but increase how much you owe overall due to interest being added.
You’ll pay less each month but you won’t be paying off any of the capital, so you’ll still need to find a way to repay this once you reach the end of your mortgage term.
Your repayments will be lower but the difference in cost is added to your mortgage capital. Interest is charged on the deferred interest as well as on the capital so it can be an expensive way to borrow money.
If you’re at the end of your fixed term, you may be able to save a lot of money off your repayments by finding a better mortgage deal. Locking into a low fixed rate for a few years can help you to manage your finances
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.