If you’re struggling to pay your mortgage, you might be able to apply for a mortgage payment holiday. Find out how mortgage payment holidays work, the circumstances in which you might be granted one and the pros and cons of getting one.
Applying for mortgage payment holiday
You can no longer apply for a mortgage payment holiday if your finances have been impacted by coronavirus.
If your payment holiday has ended, or is ending soon, it’s important you understand what happens next and what extra support might be available.
Find out more in our guide What to do when your coronavirus mortgage payment holiday has ended
Mortgage payment holidays might still be available at the lender’s discretion in certain circumstances, for example if your mortgage contract allows it or as part of a tailored solution if you are in financial difficulty.
The main difference is that payment holidays not related to coronavirus will show up on your credit file and might affect your credit score.
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What is a mortgage payment holiday?
You can no longer apply for a coronavirus mortgage payment holiday. But, if you meet certain conditions, you might still be able to get a mortgage payment holiday.
A mortgage payment holiday is an agreement you might be able to make with your lender that allows you temporarily to stop or reduce your monthly mortgage repayments.
For example, depending on your circumstances and previous payment history, you might be able to take a break up to six months.
Not all mortgages offer the option of a mortgage payment holiday – it depends on the product’s terms and conditions.
Qualifying for a mortgage payment holiday
Whether you qualify to take a payment holiday, for how long, and the conditions you must meet first will depend on:
- your lender
- the mortgage contract, and
- your financial circumstances.
Often, to qualify for a payment holiday, you’ll need to have previously overpaid your mortgage.
That means paying more than your agreed monthly payments until you’ve built up enough credit to take a break from payments.
However, your lender might also allow you to reduce or suspend mortgage payments if you’re temporarily struggling to meet the monthly cost due to a change of circumstance, such as redundancy or going on maternity leave.
If you’re in mortgage arrears you won’t qualify for a mortgage payment holiday.
But don’t let that stop you contacting your lender. They’ll be keen to help you come to an arrangement.
Pros of a mortgage holiday
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The biggest positive about a payment holiday is that it relieves some pressure for a while.
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For a while, you have one less thing to worry about when considering your outgoings.
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If you’re only facing a temporary drop in income, perhaps because you or your partner are having a baby and the mortgage holiday is to cover the maternity leave period, this can be a sensible move.
Cons of a mortgage holiday
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While a mortgage holiday can be a useful short-term solution, it’s not suitable if you can’t afford your mortgage payments because your household income has reduced permanently.
There are several important things to bear in mind:
- While you’re not making mortgage payments, you’re still racking up interest on your remaining mortgage balance.
- When the payment holiday ends, your outstanding mortgage balance and mortgage payments will be higher than they were before the holiday.
- Even if your lender agrees to this temporary solution, your credit file will be affected. This could affect your ability to get credit in future.
If you’re in arrears or struggling to pay your mortgage
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Are you thinking about a payment holiday because you’re struggling to meet your mortgage payments or in danger of falling into arrears? Then it’s important to talk to your lender as soon as possible about an alternative solution.
Lenders would much 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 a good idea to shop around for a cheaper mortgage deal.
Our guide Remortgaging to cut costs tells you how to do this and what to look out for before you do
Debt advice
If you’re still worried, you can get free debt advice from organisations such as Citizens Advice or StepChange
Remember, taking a mortgage holiday is only suitable as a temporary measure – and only when you have enough equity (capital) in your property to prevent you falling into unmanageable levels of debt.
Read our guide on Mortgage arrears or struggling to pay your mortgage
How to apply for a mortgage holiday
Check with your lender and have a look at your mortgage terms and conditions to see if you’re able to take a mortgage holiday and if they are allowed under your mortgage agreement.
The criteria will vary from lender to lender.
- The length of your payment holiday is usually at the lender’s discretion and tailored to your personal circumstances.
- Typically, you will often have needed to have made payments on time for a minimum period before you qualify to take a mortgage holiday.
- Your ability to take a mortgage holiday also depends on the size of your mortgage and the value of your home. Some lenders will only allow a mortgage holiday if the loan-to-value of your mortgage is lower than 80%.
