The Chancellor of the Exchequer, Rishi Sunak, announced that UK lenders will be offering mortgage holidays for those struggling financially during these unprecedented times.
Mortgage lenders will now be offering a three month mortgage holiday (also known as a payment holiday) to those households who are struggling financially with the widespread impact of the coronavirus.
This announcement is an attempt to offer much needed relief to homeowners who need to self-isolate but are worried about how they’re going to keep on top of their mortgage payments if they aren’t working.
If you've been furloughed, you could get paid 80% of your wages, up to a monthly maximum of £2,500. Read our page on the Coronavirus Job Retention Scheme (CJRS), and use the calculator to see what your new income could look like.
-
- + What is a mortgage holiday?
- A mortgage holiday doesn’t mean you’ll receive free money, it simply means you can relax a little as you won’t have to pay your mortgage for a few months until you’re back on your feet again.
-
- + Will I still have to pay interest if I take out a mortgage holiday?
- The interest will still need to be paid but not during the mortgage holiday period. The interest, plus the regular mortgage payments, will need to be paid once your usual payments resume as normal.
For instance, if you have 20 years and three months left on your mortgage, you won't pay anything for three months, and then you'll see a slight increase in your monthly payments for the remaining 20 years, as you make up for the three month break you had. Lenders will check to make sure this will still be affordable for you in the long-run, and if it isn't, they'll discuss increasing your mortgage term instead.
-
-
-
-
-
-
-
-
-
-
- + How do I apply for a mortgage holiday?
- Give your mortgage adviser a call and we'll put you in touch with your lender.
Lenders have created a fast track system to approve applications as soon as possible. Your lender might ask you a few questions to try to understand exactly what financial difficulty you’re in, but don’t worry about this, it’s just to make sure that a mortgage holiday is definitely the right option for you.
-
- + When will my mortgage holiday start?
- This totally depends on your circumstances and when you think you might not be able to pay your mortgage anymore, but you can decide this with your lender.
-
-
-
- + Do I need to go through any affordability checks/means testing when applying for a mortgage holiday?
- Yes, you’ll have to go through income and expenditure checks with the lender before a payment holiday is agreed. You’ll probably speak to the lender’s payments team who can identify how significant your financial pressures are.
You’ll need your bank statements and any other evidence that shows how you’ve been affected by the coronavirus, such as a doctor’s note, a redundancy letter from your employee, or something similar stating you’ve been laid off or have had your working hours reduced.
-
-
-
- + I've just had a mortgage offer, will it still stand in three months?
- This will be assessed on a case-by-case basis as different lenders have different offer validity periods. There is a responsibility to let the lender know if your circumstances have changed in the period between having and signing a mortgage offer and exchanging contracts. For instance, if a borrower had experienced a significant change in their income, or their income had stopped, then technically it would be valid but you’ll need to disclose to the lender that your circumstances have materially changed.
-
-
-
-
Speak to your mortgage adviser
If you’re struggling with ongoing financial difficulty, mortgage holidays should not be treated as a long-term solution to this. They’re purely there to offer short-term relief for those struggling with their finances.
For more information about mortgage holidays, please get in touch with your mortgage adviser and they can put you in touch with your lender to find out if you’re eligible to apply.
Interested in saving as much money as possible while times are tough? We've come up with our top 10 tips for saving money around the house - feel free to share this with others who might need a helping hand!
