Updated: Mar 19, 2020
People facing financial difficulty due to coronavirus will be offered a three-month mortgage holiday, the government said in the middle of March. Now, mortgage lenders have set out how they will offer payment holidays
But, what does that actually mean?
I would strongly advise mortgage customers to get in touch with their lender at the earliest possible opportunity and talk through their options.
Before you do so though, here are a few things to think about:
· How do ‘payment holidays’ work?
The monthly payment changes to zero, but interest is till charged for the period.
Where repayments are deferred for 3 months (or whatever period is agreed), the borrower will need to make up these repayments in the future.
It’s definitely not a long term plan, but may help a few people out in the short term.
· Will all customers receive an automatic three-month payment holiday?
No, is the simple answer. You’ll need to discuss your situation with your lender and go from there
· How do I apply for a payment holiday?
Normally, the lender would assess the customer’s financial situation and decide what help they could offer. However, these are definitely not ‘normal times’ and it could be that lenders take a much more lenient view on this over the coming weeks & months
· Are all customers eligible for a payment holiday?
In line with my answer to the question above, not necessarily, and please remember that payment holidays are not always in the interests of everyone with a mortgage.
Any payment holiday that’s offered would only be made to mortgage holders not already in arrears and where the normal monthly payments have been made in line with the original contract.
There are complex Financial Conduct Authority rules surrounding the offer of payment holidays, but generally, as I’ve mentioned before, these are generally only short term solutions to short term challenges.
· What about long term support then?
At the end of the holiday period, normal rules would then be applied and these ‘arrears’ (which technically, they are) will be discussed between the provider and customer to arrive at the best solution of clearing them and to minimise the risk of repossession if the issues that arose that forced the client to ask for help still exist. Lenders are duty bound to help as much as they can, but what help that means exactly is hard to predict at this stage
· What about my credit score?
Generally speaking, lenders should make sure that your credit score is not impacted by taking a payment holiday
· What if I don’t own my property but rent instead?
You must speak to your landlord if you are struggling to pay your rent. The landlord may be able to speak to their mortgage provider to see if they can offer any help
· What if I’m already in arrears?
Speak to your mortgage provider immediately. It’s always best to talk rather than hope the problem goes away, because it simply won’t and lenders are once again, duty bound to help
For more details, please call me, David, on 01983 875151 or email email@example.com