How can I obtain a mortgage holiday? Q&A

As the Covid-19 situation continues to develop, we understand you may have questions or concerns about your mortgage. The unprecedented economic upheaval caused by the spread of the virus has unfortunately left many in vulnerable situations, uncertain as to whether they will be able to meet their mortgage obligations.

Thankfully, the lenders have been cooperating with the government to offer payment breaks known as ‘mortgage holidays’ for those in need. Here, we answer some frequently asked questions.

Am I eligible for a mortgage holiday?

Whoever you are, whatever your previous income, if you’re in financial difficulty as a result of the spread of Covid-19, it’s likely you’re eligible for a mortgage holiday. That includes those with Help to Buy Equity loans, who can also obtain breaks from government interest payments, or wealthy individuals with private banks, many of whom have much of their wealth tied up in illiquid or likely temporarily depressed assets like shares.

If you’re uncertain, and would like to speak to a well informed advisor, contact our team. Most lenders have options to apply both by phone and on their websites.

Can landlords obtain mortgage holidays?

Those with buy-to-let mortgages can now obtain payment holidays. Emergency legislation is being brought forward to ban tenant evictions for a period of at least three months and as a result, landlords will also be able to obtain payment breaks, according to new government advice.

What can I expect when I contact my bank?

Lenders' approach to mortgage holidays is unlikely to be uniform. In many cases you'll just need to provide a few reasons as to why you'll need assistance, such as you're self-employed or have commission-reliant income. Some lenders may require proof you've lost your income.

To request a mortgage holiday, the larger banks have simplified their online process so do check the lender's website before calling their customer services hotline, as the phone queues are reported to be over one hour long in some cases.

Currently holidays on offer are for a period of three months. This may change if economic disruption continues.

Will it affect my credit history and how will it change my future payments?

It's highly unlikely that taking a mortgage holiday will affect your credit history. Most lenders have already confirmed that is the case, and Knight Frank Finance is working to get clarity from others.

In most cases you'll have three months added to the end of your mortgage. So those with 20 years left on their mortgage would have 20 years and three months. In other cases your capital and interest payments will be rolled up and your future payments recalculated.

Those with long-term mortgages will see modest increases in their payments.

It's worth remembering that you can always talk to your lender if you find yourself in financial difficulty, regardless of Covid-19. In future, if you're concerned you can't make payments, get in touch with us, or your bank, to see what's possible.

If you still have questions, or would like to assess your options, please contact Knight Frank Finance at our dedicated email address.