The mortgage payment holiday is designed to protect the most vulnerable by alleviating immediate financial pressure and any stress or worries they may have in meeting all their financial commitments and day to day needs.
If you feel that you may struggle financially, taking the payment holiday (either in full or in part) may be the right thing for you to do and in the first instance you should contact your mortgage lender.
If, however, you feel you can meet your monthly mortgage payments during this crisis, without it impacting on your everyday needs, then you should strongly consider continuing to pay them.
If you have taken or are considering taking a mortgage payment holiday, you must be aware, like any holiday, it must be paid for. For example, at the end of the holiday period your repayments to the end of your mortgage term might be recalculated by the lender to consider repayment of the portion of the outstanding loan payable, plus the interest not repaid during the deferred period. This may mean your new repayments are greater than you may have budgeted for and cause you further financial difficulty.
Taking these practical steps may help you determine if a mortgage payment holiday is right for you.
Work out your finances.
Write down what money you currently have coming in from all sources, then consider any loss of income you may experience as a result of either being furloughed from your place of work or even losing your job due to the impact the crisis has had on your employer or self- employment opportunities.
Work out your outgoings.
Write down all your outgoings, prioritising these in order of most need, i.e. food, utilities (water, gas, electric) etc.
This may be a good time to review whether payment for some of your non-essential commitments can be suspended or cancelled, for example gym memberships etc.
Work out what can you afford.
If your outgoings including your mortgage payments are likely to place financial stress on you and your family then you should contact your mortgage lender immediately to discuss your payment holiday options.
It is important that you do not simply cancel your Direct Debit mandate as this may be counted as a missed payment and you will likely be charged by your bank. Your lender will suspend taking payments from your account once they have confirmed you are eligible for and the terms of your holiday have been agreed.
You need to apply for a payment holiday by 31 March 2021 and should apply in good time before your February 2021 payment is due if you want to benefit from the maximum 6 months deferral, as all payment holidays must end by 31 July 2021.