Mortgage lenders have announced support if your income has been affected by the coronavirus outbreak, including a repayment holiday of up to a maximum of six months. The deadline for applying for a repayment holiday is 31 March 2021.
Applying for a mortgage payment holiday
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The deadline to apply for a mortgage payment holiday has been extended to 31 March 2021.
Your payment holiday can be up to a maximum of six months. So, if you have already taken the full six-month payment holiday, you cannot apply for another one. However, your lender might be able to help you in other ways.
If you’ve already taken your full payment holiday, it’s important you understand what happens when it comes to an end.
Mortgage payment holiday calculator
Understand the impact of payment holidays, increases to your monthly mortgage payments and how much extra you’ll pay over the course of your mortgage using this mortgage payment holiday calculator.
If you’ve not taken any holidays on your mortgage payment yet, you can apply for a payment holiday of up to six months in total. However, you should continue to make payments if you can afford to.
If you’ve already taken a payment holiday, this can be extended up to a maximum of six months. However, it’s in your best interests to start your repayment s again if you can afford to.
Cancelling your direct debit is not a payment holiday and will be counted as a missed payment if it has not been agreed with your lender. You should not cancel your direct debit without speaking to them first. A missed payment could show up in your credit file and may impact your ability to remortgage.
Individual credit files should not be affected but if you are worried you should speak with your lender. You should also remember there are other ways lenders can tell whether you have taken a mortgage payment holiday which could impact future lending decisions.
Lenders might take into account other information when making lending decisions, including information provided by you or bank account information.
What your lender will discuss with you
Your lender will discuss what is covered by your payment holiday, increases in your monthly repayments and any increase in the total amount payable under your mortgage contract once the payment holiday has ended.
They may discuss alternative ways of how you can repay if this is more suitable, but the main options your lender may consider are outlined below:
Spreading your deferred payments over the outstanding term of your mortgage
This means you will see an increase in your monthly mortgage repayments once your mortgage payment holiday period is over. The shorter the term left on your mortgage, the larger the increase in your monthly payments, once the mortgage payment holiday is over. You should consider the impact the higher mortgage repayments will have on your future monthly financial commitments.
Increasing the length of your mortgage term
Extending the length of your mortgage means you might see a smaller increase in your monthly repayments. But you will be paying your mortgage back over a longer period which means you will be paying more in interest over the term of your mortgage.
Making interest or capital only payments
Just making interest only or capital only repayments during your mortgage holiday might be an option for some people. This will reduce any increases in your monthly repayments compared to some other options once your mortgage holiday period is over, but you will still need to pay back any shortfall in your normal monthly payments.
Information your lender should provide for you
Your lender should explain the impact of any option on your monthly payments or the term of your mortgage
They should also discuss options for you to choose an alternative means of repaying the amount if this is more suitable.
Any information should be provided in good time and make clear you could be paying more over the lifetime of the mortgage, compared to an alternative repayment means, such as using a lump sum.
You should also always ask your lender or mortgage adviser to explain what this will mean for you and whether there are other options which may be available to you.
If you are already behind with mortgage payments
Being currently behind with your mortgage payments does not exclude you from applying for a mortgage payment holiday if this is appropriate for your circumstances.
If you’re worried about repossession you should not be at risk of losing your home during this period as mortgage repossession proceedings without your agreement have been suspended until 31 January 2021.
If you have a mortgage with an unregulated or inactive lender
If you have a mortgage with an unregulated or inactive lender and would not normally fall under the scope of these changes, these providers are also being asked to adopt this guidance and we will provide further information when we know more.
Further help and guidance on mortgage payment holidays can be found on the FCA websiteopens in new window
If you are asking for a mortgage payment holiday for a reason unrelated to coronavirus, there are different rules in place, so make sure you talk to your lender and clearly understand any impact before you make a final decision.
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