Mortgage Payment Holidays | Mortgage Broker in Nottingham

Due to recent events, Mortgage Payments for most have become quite hard to keep up with due to the uncertainty of finance and the economy. This has led to circumstances such as Mortgage Payment holidays been implemented by the Government which entitles all borrowers to a three-month payment holiday if they need it.

The majority of lenders have said that they will abide by this and are supporting their current borrowers during this time of need. However, some are not upkeeping levels of consistency.

Some Lenders are taking time to develop their response whilst others have been quick to the call so our Mortgage Advisors have put together some information to keep you informed on need to know information.

What is a Mortgage Payment Holiday?

A Mortgage Payment Holiday as an agreement settled between you and your bank, building society or mortgage lender to put off your monthly mortgage payments for a certain period of time, in this case 3-months.

However, the break in your mortgage payments does not mean you never have to pay the amount back. The interest you defer is re-added onto the loan amount whilst your capital balance will not decrease. Simply put, the mortgage amount will increase a slight amount and you will continue to attract interest on the overall amount.

When it comes to being ready and able to pay your mortgage payments again, your monthly payments could then be recalculated at a slightly higher level or your mortgage term increased. Most lenders would prefer the first option as with some borrowers, it could take them over retirement age.

Depending on the conditions included in your mortgage deal, you may be able to pay off a lump sum at some point down the line to help you get back to speed with where your mortgage originally would have been.

Mortgage Payment Holidays are available both for those with residential or Buy-to-Let mortgages, which means landlords also have assistance if rental payments are affected.

What is the Government Proposal?

The full proposal is in detail below:

• Mortgage lenders will offer an automatic 3-month mortgage payment holiday for customers who are affected whether it be directly or indirectly, by COVID-19.

• The mortgage payment holiday will apply to customers who are up to date on their payments, not in arrears, and wanting to self-certify that they are impacted by COVID-19

• This means that there will be no need for lenders to complete or reassess an income and expenditure assessment, or an assessment of alternate payment options as ordinarily required under MCOB.

• This proposal will allow lenders to be more responsive to customer needs and offer relief in a simple way to customers which is quick and effective if they have been impacted by Covid-19.

• Lenders will make it apparent to customers that interest will accrue in the holiday period and this will need to be made up deferred payments in the future.

• Customers who wish to undertake a full assessment of their ability to pay or financial difficulty may still do so if they feel the need.

Mortgage Payment Holidays: How do I apply?

When reviewing your Mortgage Payment Holiday, we would recommend speaking to a Mortgage Advisor in the first instance rather than instantly looking to undergo a mortgage payment holiday if there isn’t a pressing need to do so as Lenders will be prioritising the most urgent cases first.

By approaching our Mortgage Broker, we will be able to talk through your circumstances and look at all options available for your situation.

For a customer, up to date with payments, not in arrears and impacted by COVID-19:

• the customer would have to contact the lender and inform them of their situation e.g. that they are impacted by COVID-19
• the lender would accept these details from the customer and offer the automatic 3-month mortgage payment holiday that is applicable.
• no evidence will have to be retrieved from the customer.
• the lender highlights that interest will accrue and the customer will be contacted at the end of the three months to complete an assessment of the customer’s circumstances.
• at the end of three months, an arrangement to pay will be agreed with the customer according to their circumstances to recover any shortfall that has possibly occurred, while ensuring that the mortgage remains affordable and sustainable for the customer.
• the lender will let it be known that if the customer wished to complete a full assessment now, there may be other forbearance options more suitable to the customer.

Mortgage Payment Holidays – What does this mean for my Credit Score?

When mortgage payment holidays are normally carried out they show on your credit score as a negative impact but most lenders have now stated that any cases linked to the virus will mean that this does not apply in the current scenario.

When looking into the matter it is an important reminder that you ask the question directly to your lender and make note of the response, keeping a record of the name of the person you are speaking to and the date of the enquiry. This will avoid any possible confusion down the line as different lenders are carrying out different things.

Will I still be able to remortgage or take a Product Transfer with my lender?

The matter of remortgaging and product transfer have come to be quite controversial elements at this moment in time. There has been apparent evidence suggesting that lenders are asking borrowers not to make any unnecessary changes to their mortgages whilst within the current situation.

So, lenders are not allowing these to happen during this time but this means that borrowers who are near to the end of their existing product may be forced to move on to the higher lenders variable rate.

This could perhaps mean to many borrowers acting too early will find themselves on a mortgage payment holiday that gathers interest on an even more expensive variable rate which could be avoided.

Our Mortgage Broker in Nottingham team highly recommend speaking to a Mortgage Advisor in Nottingham before you take any further action to see what the safest option would be, and the most sensible way forward.

What “Other Options” are available?

There are other options available, where some lenders are willing to offer ‘interest-only’, which will help reduce monthly payments drastically but not to add any increase to the loan amount by still servicing the interest payments each month.

It may not be deemed necessary to convert all your mortgage to interest-only and even putting part of the mortgage on this basis could help relieve some tension in your mortgage payments.

To borrowers who hold savings may find that remortgaging onto an offset basis may give them some more structured support as this will reduce monthly payments whilst their savings remain untouched.

An example for this for certain borrowers who may not understand offset mortgages would be as followed:

– someone with a £400,000 loan and £100,000 in savings would only pay interest on £300,000 reducing their payments accordingly.

For others, a straight remortgage to another lender could offer some relief. By calculating the cost of any Early Repayment Charges that may be incurred, may well be enough to ease the burden or simply extending the term of your mortgage which could be seen as helpful if you are struggling with your mortgage term or monthly payments.

To discuss any of these options, or to just have a helpful chat about your current situation please get in touch with a Mortgage Advisor in Nottingham.

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