Everything you need to know about mortgage holidays
For many, your mortgage is the biggest monthly outgoing that will not cease during this period. If you are struggling to make payments, because of a reduction in work due to the coronavirus, you may be eligible to defer the payments.
If you need to take a mortgage payment holiday, you will have been pleased to hear that on Tuesday March 17th many banks agreed to offer ‘forbearance’ on mortgages, and you may be eligible to benefit from this help. Please bear in mind that there are downsides to the mortgage payment holiday as you will still need to fulfil your contract with the bank.
If not, it is worth noting that changes in interest rates may benefit you during this period, depending on your mortgage type:
- If you are on a fixed rate mortgages your rate will not change.
- If you are on a variable-rate mortgage, this is dependant on the standard variable rate of the particular lender itself, which has almost certainly dropped recently, so check out your lender’s rates to see exactly how this benefits you.
- If you have a tracker mortgage, this usually follows the Bank of England base rate and right now could result in a dramatic drop in your monthly payments.
Your questions answered:
I am a landlord and my tenants can’t pay the rent, what should I do?
The current regulations protect tenants from eviction and support you, the landlord, in deferring payment for at least three months while you are not receiving rent.
Is my bank offering mortgage holidays?
Whether you live in the property or are the landlord, it is worth noting that this is a voluntary agreement, and the terms will be up to your individual lender.
You need to go to your lender’s website and find the relevant information. Many banks still ask you to call customer services, while a few (e.g. Nationwide and Santander) have set up an online system. Make sure that you meet the requirements set out by your lender.
Do I have to have coronavirus, or symptoms of the illness, to claim a mortgage holiday?
No, this is based on financial difficulties.
What documentation do I need to prove my financial situation?
Most lenders are asking you to self-certify, but it is worth checking their website before starting the process.
Does this mean I get three months free on my mortgage?
Sorry, no. If your mortgage payment holiday request is successful, then you will still owe the bank the outstanding capital and the bank will recalculate your mortgage at the end of this period, meaning your payments will likely increase slightly. Remember, this will be spread across the whole mortgage period, so will likely be a small monthly increase. In some cases, the lender may consider extending your mortgage period.
Can I reduce my monthly mortgage payments for this period instead of stopping completely?
Depending on your lender, the mortgage payment holiday period should allow for either a reduction or a pause. This may also be dependant on your financial situation.
Is it limited to three months?
This is at the discretion of your lender.
I’m already in arrears, will this affect me?
The only way to know for sure is to contact your bank, for many banks this does mean you cannot apply online but it may be possible through customer services.
How long is this going to take?
Most lenders have been able to initiate a fast-track approval system.
Will this affect my credit rating?
No affordability assessment is conducted and there should be no marks on your credit record. This means no negative rating impact.
Will the interest on my mortgage be suspended?
Sadly no, the outstanding balance will continue to rack up interest.
Disclaimer: Freelancer Corner is not a financial advice service; this information is gathered from mortgage advisors and online resources and you should always consult your bank or financial advisor for information about your particular circumstances.