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Mortgages & Coronavirus: what you need to know

Since the Covid-19 pandemic began, a lot of information has been shared by the government and it can feel like a lot to digest and sort through. Many announcements have been about providing support to those affected during this uncertain period, including giving mortgage payers access to repayment holidays. At Salary Finance we want to make finances simple and help reduce some of the financial stress you might be feeling. 

This is why we’ve put together some simple FAQs below to help clarify what a mortgage holiday is and whether this is something that could help you navigate these uncertain times. 

What is a mortgage payment holiday? 

According to the Money Advice Service, a mortgage payment holiday is “an agreement you might be able to make with your lender allowing you to temporarily stop or reduce your monthly mortgage repayments.”

On Tuesday 17 March, the government announced it will be supporting mortgage repayment holidays for borrowers affected by coronavirus, meaning that you could potentially pause or reduce your monthly mortgage payments for up to three months if Covid-19 has impacted your ability to pay. 

Am I eligible for this?

To find out if a mortgage repayment holiday is an option for you, the first thing to do is get in touch with your lender and explain your situation and circumstances. 

Many banks and lenders have set up specific online application forms, FAQs, and helplines for Covid-19 related mortgage repayment holidays. Lenders have also committed to getting back to mortgage holiday applicants as fast as possible. 

How much will I have to pay back after my mortgage holiday?

If you take a mortgage repayment break, you will have to make up the missed payments at the end of your repayment holiday. Your lender will explain the options available for you to do this when agreeing your personal plan.

There isn’t a one-size fits all option for your repayment plan after your mortgage holiday ends. You and your lender will agree to specific repayment terms based on your individual circumstances. There are a couple of potential scenarios that are important for you to consider: 

1. The terms of your loan could extend meaning the length of your mortgage would increase

2. Your monthly repayments could increase when the mortgage holiday ends

Please bear in mind, your lender will continue to charge interest on the amount you owe over your mortgage holiday, meaning you will pay more interest overall. It’s important to ensure that this is clear when you agree to new terms with your lender to ensure that it will not negatively impact you financially in the long-run.

Will this have a negative impact on my credit score?

According to FCA guidance, your credit score will not be affected if you have taken a mortgage holiday because you have been affected by coronavirus.

I’m already behind on my mortgage repayments, can I still get a holiday repayment? 

This will depend on your lender and it is something you will need to check. Most banks will give you access to a repayment holiday (if you have been affected by Covid-19), even if you are currently behind on your repayments. However some lenders may require you to be up-to-date with your mortgage payments to be eligible for a mortgage holiday. Please contact your lender to discuss your options. 

How do I know if this is the right option for me

A mortgage repayment holiday could help relieve some of the immediate financial pressure that you may be under because of coronavirus. It will be one less outgoing expense for you to worry about, which could help you during this difficult period. 

It’s important to keep in mind that the terms of your mortgage repayments will change once the payment holiday is over. You should carefully consider what the impact of taking a mortgage holiday will be on your day-to-day finances in the longer term. 

For example:

  • Is the disruption to your finances temporary and will you be able to manage potentially higher mortgage repayments once things get better?
  • If your mortgage repayments increased, could you reduce your outgoing spending over the next few months? 
    • See Salary Finance’s useful guide on reducing monthly spending here
  • Do you have other debts you need to consider? 
    • See Salary Finance’s useful guide on dealing with debt during this difficult time here 

A mortgage holiday could give you some financial headspace and help you get through this uncertain period, however, the holiday is currently only for 3 months and depending on what you agree with your lender it’s important to ensure that it will help you long term. 

Here are some helpful websites and articles: 

Financial Conduct Authority Guidance: 
https://www.fca.org.uk/consumers/mortgages-coronavirus-consumers

Money Advice Service: https://www.moneyadviceservice.org.uk/en/articles/mortgage-payment-holidays#coronavirus-and-mortgage-payment-holidays

Barclays:
https://www.barclays.co.uk/coronavirus/mortgages/

HSBC: 
https://www.hsbc.co.uk/guides/borrowing/what-is-a-payment-holiday/

Santander: 
https://www.santander.co.uk/personal/support/loans-and-mortgages/coronavirus-faq#sq1

Nationwide Building Society:
https://www.nationwide.co.uk/support/coronavirus/mortgage-payment-holiday

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