Mortgage Payment Holidays | Mortgage Advice in Sheffield

Mortgage payment holidays

At the beginning of the Coronavirus pandemic, the Government promised that all borrowers would be allowed a three-month mortgage payment holiday if they needed it. Most lenders followed the Government’s guidelines and did their best to help their borrowers during these hard few months.

Here at Sheffieldmoneyman, we have thought carefully about the possibilities of what could happen to your mortgage over the next few months and are working very closely with all of our lenders to ensure that if anything changes, we can let you know you straight away and recommend the best option for you to take so that you still feel secure and happy with your mortgage.

What is a mortgage payment holiday?

A mortgage payment holiday is a period where you can defer your monthly mortgage payments. This is an agreement between you and your bank, building society or mortgage lender. The set period in this situation should be around three months.

You will still be required to make all of these payments. The interest that you defer will be added onto the loan amount whilst your capital balance will not decrease. So, as well as your total mortgage amount increasing, the interest on it will too.

Once you have decided that you will be able to continue with your mortgage payments, either your monthly payments are recalculated at a slightly higher level or your mortgage term is extended. Lenders are more likely to recalculate your monthly payments as extending your mortgage term could put you past their standard retirement ages.

If you are lucky, once you have resumed paying monthly mortgage payments, you may be able to pay off a lump sum later on in the year. This is a good way to get your monthly payments back to how they were before your mortgage holiday payment period.

Mortgage payment holidays can be accessed for borrowers with both residential and Buy to Let Mortgages. This proves beneficial to landlords as they have help if rental payments are affected.

The government’s proposal

Here is the Government’s proposal following the COVID-19 outbreak:

• Mortgage lenders will offer an automatic three-month mortgage payments holiday for borrowers who have been impacted 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 lenders will not complete 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 forbearance in a simple way to customers in an environment where the operation of collections teams made be also impacted by COVID-19
• Customers will be made aware that interest will accrue in the holiday period and they will need to make 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.
  

How can I apply for a Mortgage Payment Holiday

Firstly, we recommend speaking to a Mortgage Advisor in Sheffield as they can sort everything for you and check what your current mortgage options are. They will assess your situation carefully, making sure that you are happy with everything that is going on and feel secure and comfortable throughout the full application process. As a Mortage Broker in Sheffield, we know the ins and outs of mortgage payment holidays and we know how to communicate with your lender to try and get you the best deal available to you.

Here are the steps that you will need to take if you are up to date with your mortgage payments, not in arrears and have been impacted by COVID-19:

• The customer would contact the lender and inform them that they are being impacted
  by COVID-19
• The lender would accept these details from the customer and offer an automatic
  three-month mortgage payment holiday
• No evidence is needed for the lender
• The lender makes the customer aware that interest will accrue and 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, also ensuring that the mortgage remains affordable and sustainable
• The lender notifies the customer that if they wished to complete a full assessment now, there may be other forbearance options more suitable to the customer.
  

Will a mortgage payment holiday impact my credit score?

Yes, it can have a negative impact on your credit score, however, it won’t in this situation. This is because your lender will be able to see the mortgage payment holiday was down to a virus and they won’t let it affect anything.

You will need to contact your lender prior to your application just to confirm this. You will need to make a record of the date and time and the name of the person that you spoke to. This will avoid confusion further down the line in case anything happens that is contrary to what was stated.

Will I still be able to Remortgage or take a product transfer with my lender?

This has all changed due to the coronavirus outbreak. Even when the virus wasn’t seen as a threat, you could still continue to make changes to your mortgage as usual. Now everything has changed and lenders are avoiding all remortgages and product transfers. So, at the moment they are not allowing either.

This means that borrowers who are approaching the end of their existing product could be forced to move onto the higher lenders variable rate. So people who decide to act too early could find themselves on a mortgage payment holiday that accrues interest on an expensive variable rate.

Again, this is why we recommend speaking to us, your local Mortgage Broker in Sheffield. Before speaking to us, it could be helpful if you could arrange your mortgage transfer first then enquire about the payment holiday.

Other options available

There are other routes to take to benefit you and your mortgage in these next few months. Your lender could offer you a temporary switch to interest-only to try and save you some money on your monthly payments. This will not add any further to the loan amount by still servicing the interest each month.

You may not need to convert all of your mortgages to interest-only and it may be that putting your mortgage on this basis could give you that breathing space that you need.

If you have savings, remortgaging onto an offset basis could give you that extra push you need, you could be cutting down on your monthly payments whilst keeping your savings untouched.

For example, someone who has a £300,000 loan and £100,000 in savings would only pay interest on £200,000. This will reduce their monthly mortgage payments significantly.

Others may benefit from a straight remortgage to another lender, working out costs of any early repayment charges or simply extending the term of your mortgage. It really depends on yoru financial situation and what you are comfortable with.

This is why we think you should get in touch with a Mortgage Advisor in Sheffield during these tough few months. We can recommend the best option for you to take based on your personal and financial situation. We have been in the mortgage game for quite some time now and we want to help you with anything mortgage-related, we love it too! Get through these few hard months of mortgage payments with help from your Mortgage Broker in Sheffield, Sheffieldmoneyman.

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