The outbreak of Coronavirus has left many of us facing a significant financial crisis and loss in the job. There are many who are suffering from crisis because isolation, social distancing, or illness and there are also many who are employed in a business that can experience a hit in revenue putting your job at high risk.
To help the people who are suffering from the crisis, the government announced that homeowners can claim for the three-month “holiday” from their monthly mortgage repayments. The scheme, which was announced in March, was extended to the end of October 2020 in the month of May.
What is a Mortgage Payment Holiday?
A Mortgage Payment Holiday enables you to pause your monthly payments for a short period. Payment holiday, also known as payment deferral, is started by the government to help you find the perfect solution for short-term financial concerns. During the payment holiday, interest will be added to your loan balance and will continue to accrue. Although taking a payment holiday might not worsen the status of your credit file, lenders will take into account other information while making lending decisions in the future.
Are People Relying into Mortgage Holidays on?
Yes. So far, more than 1.8 million homeowners have taken this three-month mortgage holiday since the scheme was announced in March. It has helped borrowers who are facing financial difficulty due to the coronavirus crisis.
How do you qualify for Mortgage Holiday?
Mortgage payment holidays will end in October 2020 and are available for all homeowners who are updated with their mortgage payments.
This includes landlords which fall under the category of buy-to-lets and whose tenants are undergoing financial crisis due to the outbreak of a pandemic. Landlords who are taking payment holidays have to pass on the relief to the tenants.
If you are a homeowner and updated with your mortgage payment, we recommend you contact the lender as soon as possible so that they can review your position and discuss the options available to you.
Who all are eligible for a mortgage payment holiday?
Every lender will have different eligibility rules, but in general, the following will criteria will apply:
- You must have previously overpaid your mortgage and built up sufficient credit so that you can take a break from payments.
- if you are finding it hard to meet your monthly mortgage due to the outbreak of a pandemic.
- if you are currently in arrears with your mortgage payments, you generally disqualify for a mortgage payment holiday.
How to apply for a mortgage holiday?
Speak to a mortgage lender, we will also suggest discussing once with business law solicitors and we would also recommend paying online.
Many lenders require around 10 days’ notice before you apply for mortgage holiday so act now if you are finding issues meeting with the repayments.
Benefits of Mortgage Holiday
Here are some of the ways how mortgage holidays can help you:
A mortgage holiday can relieve financial pressure temporarily
If you have a temporary drop in income, you can consider going for a mortgage holiday as it can be a sensible move.
Now, the main point is, how Mortgage Holidays can Affect your Credit Rating?
Here are some of the ways how mortgage holidays can affect your credit ratings:
- If you arrange mortgage holidays, you still would be charged with the interest on your mortgage, and thus your mortgage balance will increase.
- If your lender agrees for mortgage holidays, your credit file may get affected, while in turn will affect your ability to borrow money as a mortgage in the future.
- Once the mortgage holiday is over, you would need to contact the lender for extending your mortgage term or to increase the monthly repayments so that you can pay off the increased loan.
In a nutshell
Payment holidays are not a long-term solution but are designed to help you cope up with a shortfall in income for a shorter period. Being on a mortgage ability can seriously impact your ability to borrow. According to the government, consumers who can afford to re-start mortgage, it is highly beneficial for them to do so. Moreover, borrowers that resume their mortgage payments will be given the best options to do so.
So, for the ones who are looking for financial management
options due to a short-term crisis in their business, payment holidays is the
option they can rely on. However, if you are looking for a long-term solution,
then remortgaging, extending mortgage terms, switching to an interest-only
mortgage and making partial payments are some of the options you can rely upon.