Mortgage lenders have announced support if your income has been affected by the coronavirus outbreak, including a repayment holiday of up to three months. This includes buy-to-let mortgages. The mortgage payment holiday will provide flexibility in repaying your mortgage by allowing you to stop or reduce your monthly payments for up to three months. This could provide much needed help if you need it, but it won’t be suitable for everyone and it won’t be free money.
Applying for a mortgage payment holiday
Cancelling direct debits
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.
Contact your lender and tell them you are experiencing payment difficulties due to coronavirus.
There will be a fast track approval process in place and you won’t need to provide evidence or have an affordability test. So, you should get a quick decision.
Any unpaid interest will probably still need to be paid back but you won’t have to worry about any additional fees or charges.
Individual credit files should not be affected but if you are worried you should speak with your lender. You should also remember that there are other ways lenders can tell whether you have taken a mortgage payment holiday which could impact future lending decisions. Lenders may take into account other information when making lending decisions, including information provided by you or bank account information, for example.
If you’re already on a mortgage payment holiday because your finances have been affected by the coronavirus outbreak, you might be able to get this extended by a further three months.
However, it’s in your best interests to start your repayments again if you can afford to.
If you’re finances have been affected by coronavirus, but you’ve not yet taken out a mortgage payment holiday and want to, the deadline for applying for one has been extended to 31 October. At first, you will be given a payment holiday of up to three months, but if you’re still experiencing payment difficulties at the end of this period, you might be able to get it extended by up to three months.
What your lender will discuss with you
Your lender will discuss any sums covered by a 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 that 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 have been temporarily suspended but do speak with your lender.
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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