If your finances have been impacted due to the coronavirus outbreak, you may be able to take a mortgage payment holiday for up to 3 months. The government has instructed banks and other lenders to allow struggling customers a 3 month holiday on their mortgage repayments.
You’ll stop making your regular monthly payments during the holiday, but you’ll still be charged interest for this time. So, your repayments will be higher after the holiday ends. So, those mortgage holders who are struggling to make their monthly payments, who have been affected by coronavirus, shall be entitled to a three month payment holiday. Requests are being fast-tracked.
Each lender differs when it comes to implementing the scheme.
The three month payment holiday usually has two options: 1) Don't pay the capital and interest for up to 3 months. The unpaid interest accumulated over the three months would be added to the total amount of the mortgage loan, which would lead to a small increase in monthly payments for the rest of the term 2) The term itself could be extended by three months, which could slightly reduce monthly payments.
Lenders generally review each case on its individual merits and payments normally need to be up to date to qualify for the payment holiday.
If you don't wish to take a payment holiday, you could seek to reduce your monthly payments for a certain period. You will need to discuss this with your lender.
If you agree a payment holiday or a payment reduction with your lender, there should be no negative impact on your credit score as you are deemed as not having “missed” a payment without prior arrangement.
Help to Buy loans are now included where necessary for Help to Buy customers paying interest on their Equity Loans in the governments' payment holiday scheme.
Help to Buy: Equity Loans are interest-free for the first five years.
Therefore, this will apply to those who took out the loan before 31 March 2015.
Help to Buy Director at Homes England has said:
“We understand monthly mortgage payments tend to be the largest outgoing for the vast majority of households. Where households also have equity loan payments under the Help to Buy scheme, we are keen to reassure them that we will offer similar options to their main mortgage lender.
Please don’t struggle in silence. As soon as you think you might have difficulty making payments on your Help to Buy: Equity Loan account, get in touch - help is at hand.”
A lot of people are understandably worried about their credit score as the outbreak continues.
If you have outstanding debts, you should do your best to make the minimum repayments on time and always contact your lender to discuss your difficulties.
Avoid taking out any extra credit at this time unless it’s absolutely necessary to survive.
Contact us if you have any questions.
The information provided in this article is not intended to constitute legal or financial advice. You should take independent legal, accountancy or financial advice before relying on the information in this article or before decisions are made or before you embark on any course of action.
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