Should you put your mortgage on hold for three months?


Should you put your mortgage on hold for three months? Repayment holidays now available on loans for your home or buy-to-let property

  • Homeowners facing financial difficulty due to coronavirus offered vital lifeline
  • A ‘mortgage holiday’ allows them to suspend repayments for up to three months
  • When it ends, you can pay back interest built up or add it to your loan balance 
  • Coronavirus symptoms: what are they and should you see a doctor?

Homeowners who are facing financial difficulty because of the coronavirus pan – demic have been offered a vital lifeline. 

They were told last week that they would be able to take a socalled mortgage holiday where they can suspend repayments for up to three months. 

But what does this mean and how much will it cost in the long run? 

A repayment holiday is an official agreement with your lender that allows you to take a break from paying your mortgage – whether it is a loan on your own home or a buy-to-let property

HOW DOES IT WORK? 

A re payment holiday is an official agreement with your lender that allows you to take a break from paying your mortgage — whether it is a loan on your own home or a buy-to-let property. 

This could last for up to three months. Only take the time off you really need, as the interest on your mortgage still accrues. 

When your break ends, you can choose to pay back the interest built up or add it to your loan balance. If you do the latter this will push up your monthly repayments for the rest of the term. 

On a £150,000 mortgage at 3 per cent over 25 years, your regular monthly payments would be £711 a month, which includes £375 in interest, according to mortgage broker L&C. 

Taking a three-month pay – ment holiday means you would not have to pay £2,133 in mortgage costs, but would still owe the £1,125 in interest when the break ends. 

If you add this interest to your total mortgage balance it will increase your loan to £151,125. 

Monthly repay – ments will rise by £11 to £722 a month for the remaining 24 years and nine months of your mortgage term. Over a 25-year loan that’s £3,267 interest. 

HOW CAN I GET ONE? 

The financial watchdog says that a payment holiday can be offered to anyone who asks for one, and borrowers who are behind on commitments should be treated the same as those who are up to date. 

To qualify, you will usually need to provide a brief description of your circumstances, the loan details and confirm you are struggling. You then will be asked how long a break you wish to take and when you want it to start. 

Most major banks now have a payment holiday form online. Just go to your bank’s home page and follow the links to coronavirusrelated advice. 

Yorkshire Bank has set up a dedicated email address: [email protected] as has Metro Bank: mortgage [email protected] 

If you do not have access to the internet or need urgent help, call your bank but be prepared for long delays. Banks aim to help the most vulnerable by telephone. 

You can still get a payment holiday if you are a landlord with a rental property in your name or through a limited company. You may be asked if your tenants are experiencing financial difficulties. 

HOW LONG WILL IT TAKE TO KICK IN? 

If you contact your bank by phone, ask for approval times. With online forms, timescales vary, Nationwide says it aims to respond to borrowers within five to seven working days. 

Halifax says it will reply by text message within two to three working days, while TSB says it will respond by email in three working days. 

IS THERE OTHER HELP AVAILABLE? 

Some banks are offering borrowers the chance to switch from a repayment mortgage, where you pay capital back each month along with interest, to an interest-only mortgage. 

This could ease the burden on your finances, but also means you are keeping on top of interest repayments. You will not be reducing your mortgage balance so only consider this if you really need help. 

Another option is to extend the term of your mortgage, which will lower your monthly payments. 

Or, if you have overpaid your mortgage in the past, you may now be able to underpay. [email protected]

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