Mortgage Advice in Derby: Mortgage Payment Holidays

Mortgage Payment Holidays | Mortgage Broker in Derby

The recent event of Covid-19 has meant that regulations have been put into place by the government such as three-month mortgage payment holidays which could help borrowers out financially throughout the coronavirus crisis. Our Mortgage Advisors in Derby feel it’s best that our customers are upto date with everything that is going on and what is available to them, so our Mortgage Broker in Derby team has put together the latest updates in regards to what a Mortgage Payment Holiday is and what to expect.

What is a Mortgage Payment Holiday?

Mortgage Payment Holidays are agreements entered with establishments such as Banks, Building Societies, or Mortgage Lender depending on who your mortgage is set up with. The agreement will allow you to defer your monthly mortgage payments for a set amount of time.

However, this will not mean that you do not have to pay the amount back. The interest that is deferred will be added back onto your loan amount whilst the capital balance stays the same. In other words, the overall mortgage amount will increase by a small percentage which will attract interest on the whole amount.

When you are in a stable position to continue your payments, there are methods where your monthly payments may be recalculated at a slightly higher level or your mortgage term is extended a bit further. Most lenders will have an option that they will prefer which will be to recalculate your payments for the reason that if some borrowers extend their mortgage term, it could mean that it could take them over standard retirement age and they could then be perceived as a risk to lenders.

Depending on the mortgage deal that you acquired, you may be able to pay off a lump sum later on to bring your mortgage back to where it would originally have been.

Mortgage payments are available to both types of borrowers who hold residential or buy-to-let mortgages, which means landlords also have assistance of 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 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 notified that interest will accrue in the holiday period and they will need to make up deferred payments in the future
  • Customers who feel that they want to undertake a full assessment of their ability to pay or financial difficulty may still do so.

Mortgage Payment Holidays: How do I apply?

When it comes to Mortgage Payment Holidays, we recommend speaking to one of our Mortgage Advisors in Derby rather than going directly applying for a Mortgage Payment Holiday straight away if the situation is critical so you can make sure you’re making the right approach. Lenders will be overloaded with calls and will be adhering to making sure the most urgent cases are prioritised.

Our Mortgage Advisors in Derby will talk with you and offer the correct Mortgage Advice in Derby fitted to your situation and see all the alternative options available to you.

For a customer, up to date with payments, not in arrears and impacted by COVID-19, the process will be as follows:

  • the customer would contact the lender and inform them that they are impacted by COVID-19.
  • the lender would accept these details from the customer and offer an automatic 3-month mortgage payment holiday.
  • no evidence will be sought from the customer.
  • 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, while 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.

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

Normally, a Mortgage Payment Holiday can leave a negative print on your credit score but lenders are making sure this will not happen in these types of cases. When asking about the payment holidays, it is important that you ask the lender directly and make a record of the response you receive, whilst including the date and name of the person that you are speaking to which will save confusion down the line as different lenders are doing different things.

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

Remortgaging and Product Transfers at this moment in time have become quite controversial. Lenders have been asking borrowers not to make any unnecessary changes to their mortgages within the holiday period. Therefore, product transfers and remortgages are not allowed at this time.

This would mean that borrowers who are close to finishing their existing product may be forced to move on to the higher lenders variable rate.

However, if many borrowers act too early, there’s a possibility that they might find themselves on a mortgage payment holiday that accrues interest on a more expensive variable rate.

To avoid this, we recommend you seek Mortgage Advice in Derby from our Mortgage Advisors in Derby to determine the best course of action. If possible, if you arrange your mortgage transfer first then ask for a holiday then this will be the most sensible way to proceed.

What “Other Options” are available?

There are alternative options available to borrowers, with some lenders offering the option of an interest-only to help reduce monthly payments drastically but not adding any further to the loan amount by appeasing the interest payments each month. It may be that you won’t need to convert all your mortgage to interest only and that just putting part of the mortgage on this basis could offer you some form of comfort.  

For the borrowers who hold savings, remortgaging into an offset basic could be of some support as this would reduce monthly payments whilst also keeping their savings intact.

An example of offset would be: someone with a £400,000 loan and £100,000 in savings would only pay interest on £300,000 reducing their payments accordingly.

For other borrowers, a straight remortgage to another lender, making note of any early repayment charges, may ease the burden enough financially, or simply extend your mortgage term.

To discuss these options further or gain Mortgage Advice in Derby for your situation, feel free to get in touch with one of our Mortgage Advisors in Derby.

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