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Mortgage payment holidays: a complete guide

Posted on May 29, 2020

The Covid-19 or coronavirus crisis has left households up and down the country in limbo since schools closed and lockdown commenced in late March. The government has announced bailouts for individuals and businesses to help ease the financial burden caused by the outbreak. As part of these measures, homeowners were given access to vital reliefs to ensure their properties remain the safe investments they should be.

Mortgage payment holidays are the main form of relief for UK homeowners. Since their introduction, which has been supported by a number of high street banks and mortgage lenders, 1.2 million households have applied to defer their mortgage payments. But the question is – should you? Here we provide a complete guide to mortgage payment holidays so you can gain the support you need during this difficult time.

What is a mortgage payment holiday?

Traditionally used to provide relief for homeowners struggling to make repayments for the short term and only awarded in extraordinary circumstances, mortgage payment holidays have offered a lifeline for every home owning individual during the Covid-19 lockdown.

The government endorsed Covid-19 mortgage payment holidays allow homeowners to pause mortgage payments for a specified period. Most mortgage lenders are offering payment holidays of up to three months to their customers.

Am I eligible for a payment holiday?

At this time, mortgage payment holidays are being made available to all homeowners. Applicants must not however be in arrears with their mortgage repayments. Those who are not up to date with payments will need to contact their lender directly to discuss their options.

To apply for a mortgage payment holiday, you do not need to have coronavirus, nor does anyone else in your household. All those affected by the Covid-19 outbreak, either directly or indirectly, can apply. With this in mind, you will not need to provide any evidence or supporting documentation, or undergo affordability tests, to apply for a payment holiday. In addition to this, deferring will not affect your credit score.

For those who are up to date with payments, the application process is very straightforward and certain to be approved. Most lenders are accepting online applications for extra ease, with decisions made and payments paused in a matter of days.

Are there any downsides?

It is important to acknowledge that you will incur interest during the holiday, even when your lender does not take payment during the specified period. This interest will be added to your bill meaning your monthly repayments will be slightly higher once payments resume. Alternatively, your lender may extend your mortgage term to ensure deferred payments are made up. Your lender will contact you once your payment holiday comes to an end to assess your circumstances and discuss which repayment option is right for you.

To apply for a mortgage payment holiday, visit your mortgage lender’s website for information on how to proceed.