How to take a mortgage payment holiday

25th November 2019

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When you take out a mortgage you commit to making an agreed monthly payment for a certain period of time.

A mortgage payment holiday means you temporarily stop, or reduce, your monthly payment.

For example, if your lender agrees to a repayment holiday for three months, you won't pay anything for three months.

Depending on your circumstances, and previous payment history, you might be able to take a payment holiday of up to 12 months.

However, not all mortgages offer the option of a mortgage payment holiday and different lenders will have different mortgage payment holiday policies.

Why would I want to take a mortgage payment holiday?

Most people take a mortgage payment holiday because they’re temporarily short of money. You might have lost your job, for example, or be on maternity leave.

In these situations, a mortgage payment holiday could be a good solution, as you’ll be able to start making payments again when you get a new job or return to work.

However, a mortgage payment holiday isn’t suitable if you’ve got more serious or long-term financial problems such as debt, divorce or you’re unable to work for a long period of time.

If you can’t afford your mortgage, talk to your mortgage lender to see if there are any other options.

You might be able to switch from a repayment mortgage to an interest-only mortgage, for example, or extend your mortgage term to reduce your monthly payments.

Can I take a mortgage payment holiday?

Whether you can take a payment holiday, and for how long, will depend on several factors. These include:

  • your mortgage lender

  • the terms of your mortgage

  • how long you’ve had your mortgage

  • your mortgage payment history

  • whether you’ve overpaid on your mortgage

  • the amount of equity in your home

  • your financial circumstances

Not all mortgage deals offer the option of a payment holiday. Of those that do, many stipulate that you need to have previously overpaid on your mortgage to qualify for a holiday.

Overpaying on your mortgage means paying more than your agreed monthly payments.

By doing this you’ll have effectively built up ‘credit’ on your mortgage account, giving you some leeway to take a break from payments.

Can I just stop making payments?

It’s important to contact your lender before you stop making mortgage payments.

If your lender hasn’t agreed to a payment holiday you’ll be breaking the terms and conditions of your mortgage, and you could fall into mortgage arrears.

This can have serious repercussions such as a negative effect on your credit report.

So check what the rules are first.

How can I arrange to take a payment holiday?

Contact your lender if you want to take a payment holiday. They’ll tell you:

  • whether you’re allowed to take one

  • how long you can take one for

  • the date your payments will restart

  • how much your monthly payments will be after the payment holiday

What are the implications of a payment holiday?

If you take a mortgage payment holiday, your monthly payments will be recalculated at the end of the payment holiday and may increase.

This is because interest will be added to your mortgage during your break from repayments. It may mean you pay more overall for your mortgage than you would have done if you didn’t take a payment holiday.

Bear in mind that even if your lender agrees to a mortgage payment holiday, your credit report will be affected. This could affect your ability to get credit in the future.¹


¹ Money Advice Service

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