A guide to mortgage payment holidays
If you’re struggling to pay your mortgage, you might be able to apply for a mortgage payment holiday. Find out how they work, when you might need one and the pros and cons of getting one.
What’s in this guide
- What is a mortgage payment holiday?
- Can you take a mortgage payment holiday?
- If you’re in arrears or struggling to pay your mortgage
- How to apply for a mortgage holiday
What is a mortgage payment holiday?
A mortgage payment holiday is an agreement you might be able to make with your lender that allows you to temporarily stop or reduce your monthly mortgage repayments.
Depending on your circumstances and previous payment history, your lender could give you a break of up to 12 months from your mortgage payments. But you need a plan in place for how you’ll restart repayments in the long term.
Not all mortgages offer the option of a mortgage payment holiday – it depends on the product’s terms and conditions.
Can you take a mortgage payment holiday?
Whether you qualify to take a payment holiday, for how long, and the conditions you must meet first, will depend on:
- your lender
- the mortgage contract
- your financial circumstances, and
- how long it’s been since you took out your mortgage or additional borrowing.
Sometimes to qualify for a payment holiday, you’ll need to have previously overpaid your mortgage.
That means paying more than your agreed monthly payments until you’ve built up enough credit to take a break.
However, your lender might also agree to reduce or suspend your mortgage payments if you’re temporarily struggling to meet the monthly cost and can prove a change of circumstance, such as redundancy or going on maternity leave.
If you’re in mortgage arrears you won’t qualify for a mortgage payment holiday.
But don’t let that stop you contacting your lender. They’ll be keen to help you come to an arrangement.
Pros of a mortgage holiday
- Relieves some pressure for a while. Use our Budget planner to see where you could save or cut back when payments start again.
- You have more freedom to pay bills that are due right now.
- Can be helpful if you’re only facing a temporary drop in income, like maternity or adoption leave.
Cons of a mortgage holiday
- When the payment holiday ends, your outstanding mortgage balance and mortgage payments will be higher than they were before the holiday. This is because while you’re not making mortgage payments, you’re still racking up interest on your remaining mortgage balance.
- Mortgage holidays are not suitable if your household income has reduced permanently.
Even if your lender agrees to this temporary solution, it will appear on your credit file, which could affect your ability to get credit in future. Think about if you might need forbearance, like your lender agreeing to a payment holiday, at another time.
If you’re in arrears or struggling to pay your mortgage
Are you thinking about a payment holiday because you’re struggling to meet your mortgage payments or in danger of falling into arrears? Then it’s important to talk to your lender as soon as possible about an alternative solution.
Lenders would much rather come to an agreement that’ll allow you to continue paying your mortgage at a reduced rate.
Find help in our guide Help with mortgage payments
If you’re not in arrears but are finding it hard to meet your repayments, it could be a good idea to shop around for a cheaper mortgage deal.
Find out what to look out for before you go ahead in our guide Remortgaging to get the best deal
Debt advice
Remember, taking a mortgage holiday is only suitable as a temporary measure – and only when you have enough equity (capital) in your property to prevent you falling into unmanageable levels of debt.
If you’re still worried, use our Debt advice locator tool to find free and confidential debt advice online, over the phone or near to where you live.
You can get also free debt advice from organisations such as Citizens Advice or StepChange
How to apply for a mortgage holiday
Check with your lender and have a look at your mortgage terms and conditions to see if you’re able to take a mortgage holiday and if they are allowed under your mortgage agreement.
The criteria will vary from lender to lender:
- The length of your payment holiday is usually at the lender’s discretion and tailored to your personal circumstances.
- Typically, you will often have needed to have made payments on time for a minimum period before you qualify to take a mortgage holiday.
- Your ability to take a mortgage holiday also depends on the size of your mortgage and the value of your home. Some lenders will only allow a mortgage holiday if the loan-to-value of your mortgage is lower than 80%.
This article is provided by the Money Advice Service.
