The government recently announced a mortgage holiday for homeowners across the UK.
For many of us, the Coronavirus is taking over our lives and affecting our work. With many people now seeking isolation and becoming weary of the virus many shops, bars and restaurants are taking a hit. Especially now as Prime Minister Boris Johnson has told the public to go out and only travel when necessary. This has led to a lot of people out on work so that businesses can stay afloat.
Thankfully after the PM’s Speech last night, the public has been told that the banks are now allowing 3-month mortgage payment holidays for anyone affected by the coronavirus. This payment holiday scheme is designed to allow people with a mortgage to take a break from payments and focus on themselves and getting through the coming months.
What is a mortgage holiday?
A mortgage holiday is an agreement between you and your lender that allows you to temporarily stop or reduce your monthly mortgage payments for an agreed amount of time. This is generally based on the circumstances of the customer and would require checks by the bank.
Banks aren’t required under normal circumstances to offer this service however due to the mass outbreak of Covid-19 in the UK the government has advised banks to offer it as many people will be falling short of their payments due to being out of work.
When it comes to a mortgage holiday the upsides are the relief that comes with it. Although the main focus of this mortgage holiday is to give relief to people affected by the Coronavirus with a drop in income, it can also be used to help people deal with implications and changes in people’s lives. This includes things such as having a baby with a partner, honeymoon or help with maternity leave.
Things to be careful of
Although mortgage holidays 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. Although you will be having a break from paying your mortgage, the interest on your mortgage will be increasing how much you pay. This affects you when the payment holiday comes to an end as your outstanding mortgage balance and payments will, in fact, be higher than they were before the holiday.
When a mortgage holiday is normally taken out, your credit score is generally worsened. However, it’s important to find out the terms of your payment holiday. The government has advised banks to work with credit reference agencies to make sure that taking a payment holiday won’t affect your score.
What if you’re already in arrears?
If you’re looking to take the payment holiday option but are already struggling to meet your mortgage payments or in danger of falling into arrears, you should instead talk to your lender as soon as possible about an alternative solution. Lenders would 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 worth shopping around for a cheaper mortgage deal.
How do I apply for a mortgage holiday
In order to get a mortgage payment, you have to contact your bank directly. Personal banks such as Lloyds Bank, Natwest and Yorkshire Bank are requesting those who require a mortgage payment holiday to contact them directly. If you believe that you require a payment holiday, applicants must prove that they have been impacted by the virus financially.
This can be proven for example if you’ve lost valuable working hours, which will affect your income, or have to self isolate and are unable to work. If you believe that you have been impacted by the virus and seek help then contact your bank as soon as possible. You can also speak directly to the Coronavirus helpline.