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Coronavirus and Mortgage Payment Holidays

March 26th 2020

As Cartmell Shepherd Solicitors are members of the UK200Group we are able to share with you the following information on Coronavirus and Mortgage Payment Holidays which has been brought to our attention by Ann Bibby, Vice Chair of the UK200Group Tax Panel and Partner, Ellacotts.  She has received the below from Andrew Green, Caboodle Financial Services Ltd.

We hope you will find this beneficial and we will continue to keep you informed of any useful advice during this difficult time.

Coronavirus and Mortgage Payment Holidays

For many the biggest financial outgoing will be your monthly mortgage payments. If you’re struggling financially due to coronavirus crisis you may have welcomed the recent promise by the chancellor to implement payment holidays of up to three months for those who are struggling financially.

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, albeit you need to be aware that this is not free money and you will be required to pay this back when your payments start again after the payment holiday.

The first step will be to contact your lender and 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 and an online application service. There will be a fast track approval process in place, so you should get a quick decision and we are being informed that individual credit ratings should not be affected.

It’s likely the lender will spread your outstanding payments over the outstanding term of your mortgage, so 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.

When consulting the Lender websites, the updates are reasonably consistent and include the following key points to satisfy their eligibility criteria for a mortgage payment holiday:

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

For Buy to Let Mortgages, the 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.

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 I/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.

Personal Protection

It is more important than ever to keep your existing 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 air borne 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 anyone requires further advice we recommend you contact your mortgage provider for assistance.

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