The thing about holidays is that they often fall when you really need them. Whether you’re flying to the Caribbean or driving to Cornwall (the more likely of the two scenarios right now), holidays are for recharging, relaxing and regaining your energy when you’ve got nothing left to give.
Mortgage holidays, or, more to the point, mortgage repayment holidays, should be no different in as much as you should, ideally, only take them when you really need to.
Not when you’re tired or simply don’t fancy paying your mortgage for a couple of months – but when your finances have pushed you in a corner and you’re no longer able to make your monthly mortgage payments. There are two reasons for this.
Despite the fact that the term mortgage holiday sounds upbeat, it’s only really a positive if you’re at the ‘I can’t pay my mortgage’ point. If you are, then a couple of months’ grace will no doubt be welcome. However, if you can afford to continue paying your mortgage, then applying for a mortgage holiday only defers payment and therefore delays the mortgage repayment period.
So, three months off now means three months added onto the end of your term. Not only that, but by putting off paying back your mortgage, the nature of compound interest means that you’ll accrue extra interest payments and actually pay more for your mortgage overall.
Secondly, as the Independent recently reported, tens of thousands of homeowners are now facing difficulty because they decided to take a mortgage payment holiday. Interestingly, UK Finance states that around 70% of people who took a payment holiday did not need to take one for financial reasons.
However, whilst the government advised that repayment holidays would not affect credit ratings, this didn’t take into account how lenders interpret the decision to proactively defer mortgage payments and the fact that it makes those applying for a mortgage or remortgaging less attractive to lenders.
As the economy, once again, enters a period of uncertainty, lenders are naturally tightening their lending criteria in order to safeguard themselves. And a mortgage repayment holiday is likely to raise questions.
As a Guildford mortgage broker, Complete Mortgages’ advice would be to explore your remortgaging options before you explore mortgage payment holidays. In fact, we would echo some of the comments in the Independent and advise that you treat mortgage payment holidays as a last resort.
If you’re considering remortaging, or are concerned about the impact of COVID-19 on your mortgage payments, then contact us on 01483 238280 or email info@complete-mortgages.co.uk. Remember, Complete Mortgages also specialises in buy to let mortgages, commercial mortgages and first time buyer mortgages, too.
By Mark Finnegan at Complete Mortgages
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