For many people, the biggest financial outgoing will be your monthly mortgage payments. If you’re struggling financially due to Coronavirus crisis, if you have been furloughed or lost your job, you can now ask your bank for a mortgage payment holiday of up to three months.

How does a mortgage payment holiday work?

The mortgage payment holiday will provide flexibility in repaying your mortgage by allowing you to stop or reduce your monthly payments for up to three months. This won’t be suitable for everyone but could provide much-needed help if you require this. You do need to be aware that this is not free money. You will be required to pay this back when your payments start again after the payment holiday has finished.

How do I apply for a mortgage payment holiday?

The first step will be to contact your mortgage lender. Not everyone will be granted a payment holiday. Most lenders have posted a link specifically for mortgage payment holidays due to Coronavirus on their websites with an online application service. There will be a fast track approval process in place, so you should get a quick decision. We are being informed that individual credit ratings should not be affected.

It’s likely that your lender will spread your outstanding payments over the outstanding term of your mortgage. Therefore you will see an increase in your monthly mortgage payments. The shorter the term left on your mortgage the larger the increase will be in your future monthly payments once the mortgage payment holiday is over. As such, you should consider the impact this will have on your future financial commitments.

Most mortgage lenders have said that in order to satisfy their eligibility criteria for a mortgage payment holiday:

  • Your finances must have been affected by Coronavirus
  • You must be up to date with your monthly mortgage payments and not in arrears
  • You have consent from everyone named on the mortgage

Currently, the lenders can only offer a 3-month payment holiday for this situation. Therefore it is vital that if you are looking to apply for this, you do this at the most appropriate time for you and your individual circumstances. It is also vital that if you feel you need this support that you act fast to ensure that your mortgage does not fall into arrears.

If you are coming to the end of a mortgage product, it is important that you understand that you WILL NOT be able to switch your mortgage to another preferential product with your current lender whilst on a payment holiday.

For those of you who may have exercised the ‘overpayment’ allowance on your current mortgage, you may be able to ‘underpay’ on future monthly mortgage payments up to your overpayment reserve. Once again, you will need to contact your lender directly to arrange this.

Buy to Let Mortgage payment holidays for landlords

Landlords who have a Buy to Let Mortgage, your lender may be able to consent to a payment holiday. If once again, your mortgage payments are up to date and not in arrears and you can confirm that your tenants are having difficulty in paying their rent due to Coronavirus.

You will need to contact your mortgage provider in order to apply for a mortgage payment holiday.

Personal Protection Life Insurance

It is more important than ever to keep your existing personal protection plans in place. News is currently circulating that future protection policies will no doubt have exclusions in place specifically for COVID-19 but also airborne viruses in general, hence the importance of keeping your current plans in place that do not have these exclusions and more importantly, provide the essential cover for you and your loved ones during these very uncertain times.

If you don’t currently have any life insurance or personal income protection in place, please get in touch with our Independent Financial Adviser, Chris Slatter on cslatter@ellacottswealth.co.uk or 01295 250401.

If you’d like to speak with one of our tax advisers about the key points above please call Ann Bibby on 01295 250401 or abibby@ellacotts.co.uk.

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