MORTGAGE GUIDANCE
A mortgage payment holiday is an arrangement under which a lender may agree to temporarily reduce or pause payments. Availability, eligibility and the financial consequences depend on the lender, mortgage and individual circumstances.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
What is a mortgage payment holiday?
A mortgage payment holiday is a temporary change to your scheduled mortgage payments that may be available if your lender agrees. The precise arrangement depends on the lender and the mortgage.
Payments temporarily paused
Some arrangements may allow scheduled mortgage payments to stop for an agreed period.
Payments temporarily reduced
Other arrangements may involve reduced payments rather than stopping them completely.
Do I have a right to a mortgage payment holiday?
There is no general assumption that a borrower can simply stop making mortgage payments. A payment holiday normally needs to be agreed with the lender where such an option is available.
Do not stop making mortgage payments without first speaking to your lender.
What happens to the interest?
A payment holiday does not necessarily mean the cost of borrowing disappears. Depending on the arrangement, interest may continue to accrue and the mortgage balance and/or subsequent payments can be affected. The way this works depends on the agreed arrangement.
What happens when the payment holiday ends?
The lender may need to adjust the mortgage afterwards. The actual outcome depends on the agreed arrangement.
Monthly payments may change
Payments could potentially be higher afterwards depending on how the arrangement works.
The mortgage term could be affected
In some circumstances an alternative arrangement may involve changing the repayment period.
Overall borrowing costs can change
A period of reduced or paused payments can affect the total amount ultimately paid.
Could a payment holiday affect my credit record?
The effect can depend on the circumstances, how the arrangement is reported and the lender’s processes. Future lenders may consider a range of information when assessing an application, including affordability, payment history and credit information.
What if I’m struggling to pay my mortgage?
If you are experiencing payment difficulties, contact your lender as early as possible. A lender may be able to discuss available support or alternative arrangements depending on your circumstances.
If you think you may miss a mortgage payment, contacting your lender before the payment is missed can help you understand what options may be available.
Payment holiday or other mortgage changes?
Different approaches may be relevant in different circumstances. None should be assumed to be preferable without considering the mortgage, lender and individual circumstances.
Payment holiday
Temporarily reducing or pausing payments where agreed with the lender.
Changing the mortgage term
Altering the repayment period can affect monthly payments and overall borrowing costs.
Changing repayment arrangements
Other mortgage changes may potentially be available depending on the mortgage and lender.
Can I remortgage after a payment holiday?
Previous payment arrangements do not produce one universal outcome for a future remortgage application. Lenders assess applications according to their criteria and may consider affordability, payment history, credit information and other circumstances.
What should I check before agreeing to a payment holiday?
How long the arrangement lasts
Whether interest continues to accrue
What happens to the mortgage balance
What future payments may be
Whether the mortgage term changes
How the arrangement may be recorded
Any alternative options offered by the lender
Can a mortgage adviser help?
A mortgage adviser can discuss mortgage options within the scope of their service, particularly where you are considering changing or remortgaging your mortgage. Where you are already struggling to make payments, contacting your existing lender promptly is important.
Mortgage payment holiday FAQs
What is a mortgage payment holiday?
Can anyone take a mortgage payment holiday?
Do I still pay interest during a payment holiday?
Will my mortgage payments increase afterwards?
Does a mortgage payment holiday affect my credit record?
Can I remortgage after taking a payment holiday?
What should I do if I cannot afford my mortgage payment?
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