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Mortgage Holidays Are Ending Soon: Have You Got Your Finances On Track?

MORTGAGES | 26.10.2020

Approximately 1 in 6 homeowners opted to suspend their mortgage payments over the course of the ongoing pandemic. Taking advantage of the government’s mortgage payment holiday scheme. However, the mortgage holiday will soon end, as the expiring date on 31st October quickly approaches. 

Of course many homeowners who took advantage of the break will soon need to restart payments and check over their finances…

Mortgage holidays ending

As part of the special measures announced to help support homeowners during these difficult times, lenders were told by the government to offer mortgage payment holidays to anyone who needed a break from repayments.  There were concerns that mortgage holidays could affect people’s ability to borrow in the future. However, the scheme saw credit reference agencies promise not to flag these holidays as a black mark on credit files.  The scheme will come to end on 31st October, and no doubt many borrowers will be getting in touch with their lenders to see if they can negotiate an alternative. Of course due to these unprecedented times, many will have to take measures to reduce their monthly bills.  If you’re looking to make sure your finances stay on track for when the mortgage holidays ends, the good news is that lenders have designed a number of options...  

Lowering monthly repayments by extending your term

It will be possible for some homeowners to be able to extend their mortgages further, effectively adding more time to pay the loan off. This will in turn help to bring down their monthly repayments. If you opted for this, then of course it will mean that you’ll need to continue paying your repayments for the extended period, which would add more interest over the life of your mortgage. Lenders have different criteria for this, with a range of maximum ages that they will lend to. Meaning it will very much depend on your individual circumstances whether or not you can get accepted for this. Get in touch with your lender to check if you have this option.  

You could consider a switch to interest-only 

Certain lenders are also giving homeowners the opportunity to temporarily change their mortgage type, for example to an interest-only mortgage, which could lower monthly repayments.  By switching to an interest-only mortgage, you’ll only be paying off the interest and not the actual loan. Keep in mind though, that you’ll still owe your lender the same amount no matter how long you are on an interest-only deal. Meaning once you switch back to a repayment mortgage, this could result in you having to pay higher payments, if the term length stays the same. This is due to the fact that you’ll have less time to pay off the debt.  

Opting to extend the payment holiday 

It may be the case that some borrowers may be able to extend their mortgage holiday, or provide you with an option to defer the payment of interest on your loan. Of course this will be down to the lenders' discretion, which could also mean they request to evaluate your finances before coming to a decision. Opting to extend the payment holiday further will be recorded on your credit file, and could potentially affect your ability to borrow down the line.    

Contact your lender 

If you are currently under financial pressure and you’re worried about keeping things on track, the worst thing you can do is bury your head in the sand. Lenders have been instructed by the government to be lenient with borrowers who are struggling during this time.  Not all lenders will be offering every option to every borrower, so it’s important that you speak to your bank or building society to find out exactly what your options are, sooner rather than later.  

Looking to remortgage? We can help

If you happen to be approaching the end of your current mortgage deal, then choosing to remortgage can help to cut the cost of what is probably your biggest expense during this critical time. We’re leading mortgage brokers in Manchester, and will provide a personalised remortgage solution, designed specifically to fit your needs and circumstances. You can speak to our dedicated and experienced team now, who can search the whole market to find you the best deal for you. If you’re currently looking for a mortgage, we also have an online mortgage calculator which can give you a rough idea of how much you could borrow and what your monthly repayments might be. Contact us today and our team will be more than happy to help you.
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