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What Is A Mortgage Payment Holiday, And How Do I Apply?

Posted 3 months ago

What Is A Mortgage Payment Holiday, And How Do I Apply?
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Over 1.9 million mortgage payment deferrals have been offered to customers impacted by Covid-19 in the three months since the support was launched, new research has found. 

1.2 million deferrals were approved in just the first three weeks of the scheme. According to UK Finance, payment deferral amounts to £755 per month of suspended payments for the average mortgage holder.

But what exactly is a mortgage payment holiday, and how can you benefit from it. In this guide we unpackage the scheme and explain what you will need to apply. 

What is a mortgage payment holiday?

Introduced alongside the Chancellor of the Exchequer’s wide-ranging financial schemes, mortgage payment holidays is a scheme designed to help those who have been affected by the coronavirus outbreak. It allows you to repay your mortgage in a more flexible way by reducing or even stopping monthly repayments for up to three months. 

Will I qualify for a payment holiday?

Mortgage payment holidays of up to three months are available to homeowners who are not behind on their mortgage payments. They’re also available to ‘buy-to-let’ landlords whose tenants have suffered financially as a result of coronavirus. Landlords who benefit from payment holidays should pass on this relief directly to their tenants.

For homeowners who are not up to date with their mortgage repayments we advise you contact your lender, to discuss changes to your circumstances and available options. 

Will the banks want to carry out tests?

Banks will not carry out affordability tests. Nor will they require you to provide any documentation. All you will need to do, in the same way as the government's business loan schemes, is self-certify that your income has been directly or indirectly affected by the coronavirus. 

What will happen once the three months are over? 

Once you come to the end of your three-month payment holiday, your lender should contact you to discuss your situation and agree on a manageable arrangement to clear the deferred payments. 

Lenders are expected to provide a range of options, including extending your mortgage term or altering your monthly payment if they are able to. 

The FCA says homeowners who can afford to restart payments after the three months should do so, but that those who are still in financial difficulty can request a full or part payment holiday for a further three months.

For more details on how to apply for the scheme, please visit your individual mortgage provider. 

Authors: Oliver Murphy & Sacha Bright

Disclaimer

To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.

Tagged: coronavirus guide finance



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