What does a mortgage holiday mean?https://www.eldertons.co.uk/cupboard/uploads/2020/03/mortgage-holiday-scaled.jpg25601706Rosana FernandezRosana Fernandezhttps://secure.gravatar.com/avatar/fba3440b7aea54d4be2ae3a7696a26c3?s=96&d=mm&r=g
The emergency measures announced by chancellor Rishi Sunak this week included a three-month mortgage holiday to protect families who may find themselves in financial difficulty during the Coronavirus outbreak.
What is a mortgage holiday?
This is an arrangement between you and your mortgage lender and allows you to either temporarily reduce your mortgage repayments or stop them altogether for a certain period.
The option of a mortgage payment holiday will depend on the terms and conditions of your specific mortgage agreement, but if your circumstances allow, you might be able to take a break of up to 12 months.
Am I eligible for a mortgage payment holiday?
Whether or not you’re eligible to take a payment holiday, for how long, and the conditions you must meet first will depend on your lender, your mortgage contract, and your personal financial circumstances.
Everyone is in a different financial situation, and so this will vary from case to case. The best thing to do is to contact your lender directly to find out if you are eligible.
Explain your situation to them over the phone. For example, if you are self-employed and have had to apply for emergency benefits such as employment support allowance, make this clear.
How do mortgage holidays work?
The mortgage repayment is deferred for a certain period of time. So this means that the monthly payment changes to zero and interest accrues for the period, which may help if you’re struggling financially at the moment.
However, it’s important to note that when repayments are deferred for a time, the borrower will eventually need to repay the mortgage in the future, which might be over the remaining term.
What are the banks saying?
Here is a brief round-up of the mortgage holiday schemes that some of the biggest banks are currently offering to eligible customers.
A payment holiday with Nationwide gives you some flexibility in repaying your mortgage by allowing you to stop or reduce your monthly payments for between one and 12 months (subject to eligibility).
You may be eligible to apply for a payment holiday if the amount you owe does not exceed 75% of the bank’s latest valuation of your property, you’ve not had previous payment holidays totalling six months or taken one in the last three years and you live in the property and it’s your main residence.
Barclays has a range of measures that can help customers impacted by coronavirus including three-month payment holidays for loans, mortgages and credit cards, switching mortgages from repayment to interest-only, removing penalty charges to access fixed savings accounts early and enabling customers to apply for a temporary increase on their credit card limit.
You may be eligible to apply for a payment holiday if it’s been at least twelve months since you took out your mortgage and six months since you took any additional borrowing with TSB, your loan-to-valuation is less than 75% and your mortgage payments are up to date.