The coronavirus pandemic has had a devastating impact on the entire world, and many will be concerned that loss or reduction of income could leave them struggling to pay their mortgages. An announcement from the government has given homeowners the right to take a three-month ‘mortgage holiday’ to help with this. But what does that actually mean, and how do you apply for it? Here’s everything you need to know.
What is a ‘mortgage holiday’?
For those who qualify for a mortgage holiday, it’s an opportunity to take a break from regular mortgage payments. This could be a lifeline for people struggling to make ends meet.
It’s important to understand, however, that this doesn’t mean your lender will be covering those mortgage payments on your behalf. Instead, payments will be deferred, meaning you won’t be required to make a payment, but interest will continue to be added to your mortgage account. Consequently, there may be a slight increase in your monthly payments after your mortgage holiday.
Who’s eligible for a mortgage holiday?
Firstly, in order to qualify for a mortgage holiday, you cannot be in arrears with your payments.
The concept of mortgage payment holidays is designed for people who have suffered a temporary loss of income due to Coronavirus. According to UK Finance, the solution is not designed for people who have suffered permanent loss of income and have little prospect of their situation improving “in the foreseeable future”.
If you have already missed a mortgage payment, or you’ve lost your job, contact your lender immediately and see what other options might be available. For example, you may be able to switch to a different rate, lengthen your term to reduce monthly costs, or transfer your mortgage to an interest-only model.
Are mortgage holidays available on Buy-to-Let mortgages?
In a word: yes. Landlords are free to request a mortgage payment holiday for up to 3 months if they have tenants who are struggling to pay their rent in the current environment.
If tenants are still struggling after the 3-month period, landlords will be required to work with them to find an affordable solution. The government is prioritising protection for tenants whilst in the grip of this pandemic, so landlords will be unable to start eviction proceedings for at least 3 months.
How can I arrange a mortgage holiday?
The first step is to get in touch with your lender. Whether you want to arrange a mortgage payment holiday or explore other options, this is the way to get started. Be advised that lenders are incredibly busy at the moment, so making contact with them by telephone will probably take longer than usual. With that in mind, it might be worth trying to make contact online instead.
The majority of lenders are posting information on their websites aimed at telling concerned customers what to do. Some even provide online forms to enable you to apply for your mortgage payment holiday.
In any case, the crucial thing is to get in touch with your lender. You must not cancel your mortgage direct debit. Lenders are assuring customers that formally agreeing a mortgage payment holiday will have no impact on credit profiles. If you haven’t already, act now by contacting your lender – don’t let the Coronavirus crisis damage your financial situation more than it has to.