Mortgage lenders across the UK are offering payment holidays to their customers who are affected by Covid-19. Currently lenders are extending the option to take out a payment holiday to all mortgage holders, however if you are in arrears or have an unusual case, the lender may want to have a conversation first with you to ensure that taking out a payment holiday is the best option for you.

Customers who haven’t requested any payment holiday can apply for one until 31st October 2020.

Not necessarily. The Covid-19 crisis may also have an impact on your family’s income, or perhaps on your secondary income. Any impact from the crisis that could leave you struggling financially could result in you being considered as affected by Covid-19.

Most lenders will ask you to contact a specific team to help assess your options if you are already in arrears on your mortgage and are affected by Covid-19. It is worth doing so, as they may be able offer a way of helping you that may or may not be a mortgage payment holiday.

No, you must contact your lender first to agree a payment holiday before taking any action with your direct debit. If you cancel your direct debit without agreeing a payment holiday with your lender first, this may be reported as a missed payment and make it harder for you to arrange a payment holiday.

A payment holiday will mean that you will not have to make your monthly mortgage payment for an agreed period; the monthly payment is deferred to a later date. It’s important to remember you will still owe the money and interest will continue to accrue whilst the deferred payments remain unpaid.

No. As you accrue interest over the payment holiday period, you will need to repay this after the payment holiday, meaning that there is a cost to taking a payment holiday.

If you can afford to make reduced monthly mortgage payments you can take a partial payment referral and you’ll pay every month what you can afford into your mortgage account. This way, the overall payment holiday cost will be reduced.

For example, if you had a capital and interest mortgage with a balance of £136,000, a remaining term of 20 years, an interest rate of 1.3% and monthly payments of £643.83, you could choose to take a partial payment deferral of 50% for 3 months. This would mean that you would pay a partial amount of £321.92 per month. This might be a better option if it is available to you, as it reduces the effective cost of the payment holiday by 50%.

Your monthly instalment(s) will be deferred, interest will still accrue on your account and payment for the deferred monthly instalment(s) will be required later.

Lenders are offering different options for repaying payment holidays, so it is essential that you contact your lender to understand what might work best for you. Here are some common ways of making up the deferred monthly installments after a payment holiday:

• adding the deferred instalment(s) to your outstanding mortgage balance (capitalising the amount), so you can pay it over the remaining term of your mortgage,
• agreeing to a short-term payment arrangement to clear the deferred instalment(s) over several months; or,
• extending the original term of your mortgage.

If at the end of your payment holiday you are still in financial difficulties due to coronavirus, you can request a payment holiday extension of up to 3 months. Your monthly payments will be deferred until the end of the extension, but interest will continue to accrued over the whole payment holiday period.

As you approach the end of the payment holiday you’ll receive a letter or email from your lender informing you about your different options whether you can resume your payments or you need further help. If you don’t respond, your lender will assume that you’re able to resume full payments.

If at the end of your payment holiday you can resume full payments immediately, you’ll have several options to repay the sum covered by the payment holiday. These options should include:

• adding the deferred instalment(s) to your outstanding mortgage balance (capitalising the amount), so you can pay it over the remaining term of your mortgage
• Making a lump sum payment, i.e. a single payment to clear the deferred instalment(s)
• extending the loan term to maintain your previous monthly payments (unless this would take you past retirement or is not legal)

If at the end of your payment holiday you are still in financial difficulties due to coronavirus, you should be offered a full or partial payment deferral up to 3 months or alternatively:

• A term extension, an alternative product or other longer-term solutions
• Other ways of assistance, such us reducing of waiving interest

To repay the interest accrued during the mortgage payment holiday, you can choose to capitalise the amount owed throughout the remaining term. This will increase your monthly payments when the payment holiday ends.

For example, if you had a capital and interest mortgage with a balance of £136,000, a remaining term of 20 years, an interest rate of 1.3% and monthly payments of £643.83, and you chose to take a 3 month payment holiday, your monthly payments after the end of the payment holiday would increase to £653.08 and the total amount amount payable would increase by £262.

If you’d like to maintain the same monthly payment that you had before taking your mortgage holiday, you may be able to extend your mortgage term.

For example, if you had a capital and interest mortgage with a balance of £136,000, a remaining term of 20 years, an interest rate of 1.3% and monthly payments of £643.83, and you chose to take a 3 month payment holiday, you could increase your term by 4 months which would keep your new monthly payments after the payment holiday at £643.83 but increase your total amount payable by £334.40.

You can repay the amount accrued during the mortgage payment holiday in a single payment.

For example, if you had a capital and interest mortgage with a balance of £136,000, a remaining term of 20 years, an interest rate of 1.3% and monthly payments of £643.83, and you chose to take a 3 month payment holiday, you could pay off the payment holiday in a lump sum of £1,933.57, meaning that your monthly payments will stay the same after the payment holiday and your total amount payable would remain the same.

If you are currently up to date with your mortgage payments and your lender agrees to a payment holiday with you due to the Covid-19 virus, then your credit record will not be negatively impacted. However, lenders may take into account other sources of information apart from your credit record to assess creditworthiness. This could include asking for bank statements and seeing that you have taken out a mortgage payment holiday in the past. It is important that you pay your usual mortgage instalments if you are able to to do so.

You should apply for a payment holiday with your mortgage lender. Depending on your lender, this may be through an online form, an email or a phone call.

When your payment holiday comes to an end, if you need further help, you can apply for an extension. Depending on your lender this may be through an online form, an email or a phone call.

Lenders are experiencing very high call volumes at the moment trying to help customers with payment holidays, so getting through to somebody may take longer than usual. It is worth checking if the lender has an online form that you can submit.

Due to extraordinarily high application volumes for payment holidays, it may be that your lender is only able to process and start your mortgage payment holiday from next month’s monthly payment, especially if your next payment is in the next 10 days. You should contact your lender if this is going to be an issue for you.

If you are planning to stay with your lender and get a product transfer, it may be easier to switch to a new product before applying for a mortgage payment holiday. If your initial term end date is still a few months away, taking a payment holiday won’t affect your ability to switch to a new product. Some lenders are also offering extensions on initial periods so it is worth finding out what your lender can do for you.

If you are a buy-to-let landlord and your tenants’ ability to pay rent is affected by Covid-19, some lenders may be able to offer you a mortgage payment holiday. You will need to speak to your mortgage lender to check your eligibility and apply.

If you are a renter and affected by Covid-19, you will need to speak to your landlord to arrange a temporary solution. The government has advised that if a landlord receives a mortgage payment holiday for their buy-to-let mortgage, they are expected to pass on this relief to their tenants. The government has also put a temporary freeze on evictions to help protect renters affected by Covid-19.

Payment holidays are just one option that lenders can offer, so it is best to call your lender and discuss what can be done.

Other alternatives to payment holidays could include:

• Move your mortgage to interest-only payments for a short period
• Defer your interest payments for a period
• Extend your overall mortgage term (reducing your monthly payments)

If you’re struggling to pay your mortgage monthly payments, an alternative to a mortgage payment holiday is to extend the term of your mortgage so that the amount you pay monthly is reduced.

For example, if you had a capital and interest mortgage with a balance of £136,000, a remaining term of 20 years, an interest rate of 1.3% and monthly payments of £643.83, you could choose to extend your loan term by 5 years, resulting in a new remaining term of 25 years. Your new monthly payments would now be lower at £531.23, however the total cost of the mortgage will have increased by £4,849.48 due to the longer term.

If you’re struggling to pay your mortgage monthly payments and you have a capital repayment mortgage, an alternative that some lenders are offering to mortgage payment holiday is to switch to interest only for a given number of months. During those months you would only need to pay the part of your monthly payments that correspond to the interests.

For example, if you had a capital and interest mortgage with a balance of £136,000, a remaining term of 20 years, an interest rate of 1.3% and monthly payments of £643.83, temporarily moving to interest-only payments would reduce your monthly payments to £147.33.