True cost of Mortgage Payment Holiday

3-month mortgage payment holidays are available for those who are struggling

Affected by Corvid-19 and If you are struggling to keep up with your mortgage payment, you can get in touch with your bank. Banks have agreed with the Chancellor that they will offer some help on mortgages. 

This means banks would offer those struggling a three-month 'holiday', allowing borrowers a temporary break from having to make mortgage payments during this time. This is a voluntary agreement with banks – it isn't compulsory for them to offer mortgage holidays. Clients who are not up to date with their mortgage may not be offered this and an alternative arrangement may have to be agreed. 

Best to do it online (depending on the Bank), as phone lines are likely to be busy as Banks are not at full staff strength to offer the unprecedented amount of calls, they are receiving. 

How would this work in practice? 

Let's imagine you have 25 years and 3 months left on your mortgage. For the next three months, your payment would be zeroed off. Then when your mortgage repayments resume, the total you owe would be spread over the following 25 years – so you would see an uplift in future payments. 

Say for example you had borrowed £500,000 you defer payment of £ 2,100 for 3 months. The monthly payment increases after month 3 are unlikely to be much as you would pay around £2,130. But over 25 years the additional interest you pay assuming it still remains at 2% is over is around £1,500. So, think twice if you have a choice.

Unlike in the past, most Banks have promised that taking a payment holiday will not affect your credit score.

Warning !!! Do not cancel the Direct Debit. 

The big worry is because the guidance wasn’t clear, people will just cancel their direct debits.

Health Warning!!

Please note that the Financial Conduct Authority’s advice is not to just piling up more debt for later. Therefore, best avoid it if you can. You can make a payment even half, that’s better for you. Your house can be repossessed if you don't keep up with repayment.

Very important Please speak to an adviser before making a decision.