Should I take a mortgage holiday?
If you’ve taken a mortgage holiday or if you’re thinking about taking one, read on.
A mortgage holiday simply means you’re putting payments towards your mortgage on hold.
These have been useful for homeowners who are struggling financially due to the pandemic.
Here’s how they work, and what you need to know.
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If you haven’t taken a mortgage holiday
You should only take a mortgage holiday as a last resort, as you may end up paying more in interest.
If you need a mortgage holiday as a result of the coronavirus pandemic, you have until 31 March 2021 to apply
If you have taken a mortgage holiday
If you’re on a payment holiday now, and you need to stay on it, you can request an extension for another three months.
If you’ve used the full 6-month holiday, you won’t be able to get another one. But you can speak to your lender to negotiate your options.
What is a mortgage holiday?
A mortgage holiday is a break from paying your mortgage.
Initially you can apply for a 3-month mortgage holiday, but you can extend this by another three months maximum.
This doesn’t necessarily have to be directly after the first mortgage holiday either.
For example, you could have applied for a mortgage holiday in March 2020 for three months, then apply for another in December 2020 for a further three months.
How do I apply for a mortgage holiday?
You can apply for your mortgage holiday through your lender. Most will have an online portal that you can apply through.
If not, they may have a coronavirus support page that will give you more information.
You can apply for a mortgage holiday until 31 March 2021.
But you will have to start paying your mortgage again by July 2021. To benefit from the full six months, it’s worth applying before your February mortgage payment.
What happens when my mortgage holiday ends?
Your lender will usually contact you before your payment holiday comes to an end. But it’s worth calling them if they don’t.
If you’ve had your payment holiday for three months, you can extend it by a further three months. As mentioned, this doesn’t have to be straight after the initial 3-month mortgage holiday.
If you’ve had your payment holiday for the 6-month maximum period, your lender might be able to offer you some alternatives.
What impact will a holiday have on my mortgage?
A portion of your mortgage payment is interest.
If you pause your mortgage payments your interest will still build up, so you may find your monthly payments increase.
Can I still make payments during my mortgage holiday?
If you can still make some payments, a partial mortgage holiday might be worth considering.
Although you might see some increase in your interest payments, it won’t be as much as if you’d taken a full mortgage holiday.
You can apply for a partial mortgage holiday until 31 March 2021 too.
Where can I get independent financial advice?
If you’re unsure about your finances, it’s a good idea to get independent financial advice.
When you find a financial advisor, make sure they’re independent and not restricted. Restricted advisors only offer advice on a few financial products or products offered by certain companies.
There are plenty of free independent financial advisors, for example Step Change.
They offer expert and independent financial advice, and they also have specific guidance for those in difficulty due to the pandemic.
Step Change also run a phone service called National Debt Line which gives free impartial advice over the phone.
Some independent financial advisors might charge a flat or hourly rate, some might even work on a commission basis.
If you’re paying for an independent financial advisor, word of mouth is a good way of finding one. Ask family or friends if they have any recommendations.
You can check if your financial advisor is FCA approved on the FCA website.