Mortgage Holiday in Covid-19

You may be aware that on March 17, Chancellor Rishi Sunak confirmed that anyone struggling financially as a result of the Coronavirus outbreak will be able to take a three-month mortgage re payment holiday. A number of lenders had already announced repayment holidays for those affected by Covid-19, but the Government's announcement means ALL lenders will now have to honour the three-month time frame. A mortgage payment holiday is an agreement you will need to make with your lender allowing you to temporarily stop or reduce your monthly mortgage repayments. Lenders have advised that anyone struggling with repayments should contact them directly. The repayment holiday will be available to borrowers who are up to date on their mortgage payments and not already in arrears. If you believe you will struggle to make repayments in the coming months, you should engage with your lender as soon as practical to agree the best way forward, which may or may not include a payment holiday.

Interest will accrue for the period of the holiday and payments missed will be added to the loan and repaid in the future - potentially over the remaining term of the loan. The credit reference agencies are engaged with the lenders and it is anticipated that borrowers’ credit files will not be negatively affected as a result of the three-month payment suspension.

If you are concerned about making your mortgage payments during this time you should look at your lender’s website. This will be updated with the latest information, including FAQs, which can answer many queries.

We would encourage customers who can use mobile and online banking services to do so, telephone services are also available, but it will take a long time for customers to get through. If you need a mortgage payment holiday you will need to self-certify that your income has been either directly or indirectly impacted by Covid-19.

KEY POINTS:

  • A payment holiday will be available to all customers who are up to date on their mortgage payments.
  • A payment holiday will also be available to all buy-to-let landlords whose tenants have lost income because of the impact of Covid-19. Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.
  • Customers will still owe the money where a payment holiday has been granted and interest will still accrue, so if you are able to make part of your normal mortgage payment to reduce the money you owe or your interest charges then you should consider doing so.
  • Firms will make every effort to ensure that the payment holiday does not negatively impact on your credit file.
  • If you are already in arrears, you should contact your lender as soon as possible. Lenders will review any change to your circumstances to ensure that payments remain sustainable and they may be able to offer you a payment holiday.
  • If you are already experiencing financial difficulty, lenders have also agreed a three-month moratorium on residential and buy-to-let possession action (from 19 March 2020), meaning that no homes will be repossessed at this difficult time.

What is a payment holiday?

With a payment holiday you will not have to make any monthly mortgage payments for a set amount of time, in this case up to three months.

It’s important to remember that you still owe that money and the interest on your mortgage still accrues during a payment holiday.

  • Your provider will contact you before the end of your payment holiday to offer you an arrangement to repay the interest charges incurred and make up the deferred payments. If you were up to date with your mortgage payments, the lender may offer you the option to add the outstanding balance to your mortgage. This could result in an increase in your future monthly payments. Each lender will have a range of options available to help you at the end of the holiday period which you can discuss with them.
  • If you are in arrears, the provider will get in touch to assess your individual circumstances and arrange a specific agreement to pay, ensuring repayments are affordable for you. 

Will I be eligible for a payment holiday?

To be eligible for a payment holiday you will need to be up to date on your mortgage payments.

If you are a buy-to-let landlord, it will be available if your tenants have lost income because of the impact of Covid-19.

If you are behind on your mortgage payments, your lender may be able to offer you a payment holiday, amongst other options, once they consider your circumstances.

There a number of options available and payment holidays aren’t always the most suitable solution for everyone. By speaking to your mortgage provider, they can tailor the best option for you.

How do I apply?

Contact your mortgage provider direct as soon as possible. You don’t need to provide any documentation; you will just need to self-certify that your income has been either directly or indirectly impacted by Covid-19.

Try on-line first as telephone lines are extremely busy.

Have your Mortgage account number ready

If you are a buy-to-let landlord, you will need to self-certify that your tenant’s income has been impacted by Covid-19. Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.

You can apply for a payment holiday at any time before the next payment is due. The payment holiday will not start, however, until it has been agreed with your lender.

Mortgage provider telephone lines are exceptionally busy at the moment. This means that those who are most in need right now - those who are most financially vulnerable – are struggling to get through. Before calling:

  • Ask yourself: Do I need to speak to my mortgage lender today?
  • Consider: Can I do this through mobile online banking? 
  • Review: Is the answer already on my lender’s website? 

You must agree a payment holiday with your lender in advance.

You should not cancel your direct debit without contacting your lender first. Cancelling your direct debit is not a payment holiday and will be counted as a missed payment. This could show up in your credit file and may impact your ability to re-mortgage.

Please visit your specific mortgage providers own website for further details on their Covid - 19 process.

As your advisors we are here to help, so if you have any questions around engaging with your lender or more broadly around your protection policies, or the wider impacts of the Coronavirus on your financial position please do not hesitate to get in touch.

Best wishes

Anderson Wealth Management

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