You had until 31 March 2021 to apply for a coronavirus mortgage payment holiday. You might still be able to apply for a mortgage payment holiday, but these are different to what was available before 31 March 2021. Find out how mortgage payment holidays work, the circumstances in which you might be granted one and the pros and cons of getting one.
Applying for a mortgage payment holiday
You had until 31 March 2021 to apply for a coronavirus mortgage payment holiday.
If your payment holiday has ended, or is coming to an end, it’s important you understand what happens next and what extra support might be available.Find out more about what happens when your coronavirus mortgage payment holiday comes to an end.
Mortgage payment holidays might still be available under certain circumstances, but these are different to coronavirus mortgage payment holidays.
The main difference is payment holidays not related to coronavirus will show up on your credit file and might affect your credit score.
What is a mortgage payment holiday?
You can no longer apply for a coronavirus mortgage payment holiday. But, if you meet certain conditions, you might still be able to get a mortgage payment holiday.
A mortgage payment holiday is an agreement you might be able to make with your lender allowing you temporarily to stop or reduce your monthly mortgage repayments.
For example, depending on your circumstances and previous payment history, you might be able to take a break for usually up to six months:
Not all mortgages offer the option of a mortgage payment holiday – it depends on the product’s terms and conditions.
Eligibility for a mortgage payment holiday
Whether you’re eligible to take a payment holiday, for how long, and the conditions you must meet first will depend on:
- your lender
- the mortgage contract, and
- your financial circumstances
Often, in order to qualify for a payment holiday, you’ll need to have previously overpaid your mortgage.
That means paying more than your agreed monthly payments until you’ve built up enough credit to take a break from payments.
However, your lender might also allow you to reduce or suspend mortgage payments if you’re temporarily struggling to meet the monthly cost due to a change of circumstance, such as redundancy or going on maternity leave.
If you’re in mortgage arrears you won’t be eligible for a mortgage payment holiday.
But don’t let that stop you contacting your lender. They will be keen to help you come to an arrangement.
Pros of a mortgage holiday
The biggest positive about a payment holiday is that it relieves some pressure for a while.
For a period of time, you have one less thing to worry about when considering your outgoings.
If you are only facing a temporary drop in income, perhaps because you or your partner are having a baby and the mortgage holiday is to cover the maternity leave period, this can be a sensible move.
Cons of a mortgage holiday
While a mortgage holiday can be a useful short-term solution, it is not suitable if you can’t afford your mortgage payments because your household income has reduced permanently.
There are several important things to bear in mind:
- While you are not making mortgage payments, you’re still racking up interest on your remaining mortgage balance.
- When the payment holiday comes to an end, your outstanding mortgage balance and mortgage payments will be higher than they were before the holiday.
- Even if your lender agrees to this temporary solution, your credit file will be affected. This in turn could affect your ability to get credit in the future.
If you’re in arrears or struggling to pay your mortgage
Use our Budget planner to work out how much you have coming in and going out and see if there’s a way you can cut non-essential spending to help you meet your mortgage payments.
If you’re thinking about a payment holiday because you’re struggling to meet your mortgage payments or in danger of falling into arrears, talk to your lender as soon as possible about an alternative solution.
Lenders would much rather come to an agreement that’ll allow you to continue paying your mortgage at a reduced rate.
If you’re not in arrears but are finding it hard to meet your repayments it could be a good idea to shop around for a cheaper mortgage deal.Our guide Remortgaging to cut costs tells you how to do this and what to look out for before you do.
Remember, taking a mortgage holiday is only suitable as a temporary measure – and only when you have enough equity (capital) in your property to prevent you falling into unmanageable levels of debt.Read our guide on Mortgage arrears or struggling to pay your mortgage.
How to apply for a mortgage holiday
Check with your lender and have a look at your mortgage terms and conditions to see if you’re able to take a mortgage holiday and if they are allowed under your mortgage agreement.
The criteria will vary from lender to lender.
- The length of your payment holiday depends on the lender. Some will allow you take up to 12 consecutive months off from paying the mortgage, while others will allow only up to six months over the lifetime of the mortgage.
- Typically, you will often have needed to have made payments on time for a minimum period before you’re eligible to take a mortgage holiday.
- Your ability to take a mortgage holiday also depends on the size of your mortgage and the value of your home. Some lenders will only allow a mortgage holiday if the loan-to-value of your mortgage is lower than 80%.
This article is provided by the Money Advice Service.