Mortgage expert John Everest answers a few big questions to reassure mortgage holders.
When the government announced a 'mortgage payment holiday', what is it and how does it work?
A payment holiday means you agree with your lender that you will not have to make mortgage payments for a set amount of time. Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation. What’s different this time is this payment holiday will not impact your credit rating as all banks are waiving this update on your report, meaning you’ll not be impacted in the future for any credit applications for any form of credit and you can apply up to three months’ payment holiday.
It is important to remember that you still owe the amounts that you don't pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.
You must also be up to date with your mortgage.
This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.
Is everyone be entitled to a payment holiday?
Yes – If you have been impacted directly or indirectly by COVID-19. For example if you’re unable to work due the measures in place and advised to stay at home.
Will they happen automatically or do I have to apply for it?
Lenders are not automatically applying these payment holidays as there are still many people who can work from home and not impact their finances, or who have savings, or whose house finances combined mean they are still able to continue making payments.
Most of the high street lenders have been undated with calls requesting the mortgage holiday and as a result call waiting times increased to hours, not minutes. This led to lenders turning to online forms. This is good news and takes less than two minutes to complete.
To find out if your lender has a form, visit their website and search for “mortgage payment holiday”, this will direct you to a form. Once the form is completed within 2-3 days you’ll be updated by the lender to confirm your payment holiday is in place.
You must also be up to date with your mortgage.
As with other payments, if your mortgage payment is due within 5-10 days when you apply, the direct debit will claim your next payment. Do not cancel your direct debit if you cannot pay your next payment, this would not be classed as a payment holiday and would affect your credit report. Contact your bank directly and explain the circumstances and they will work with you.
I was self-employed but now don't have a job – should I be as worried about losing my home as I am right now?
You are still entitled for the payment holiday as you were impacted indirectly by the COVID-19 situation. So do apply for this to help you at your time of need and give you three months’ breathing space. This may be enough time for you to get back to work after the three-week limited movement we’re in at present.
In month 3, if you’re still struggling, contact your bank’s customer support unit and they may be able to work with you on a longer-term arrangement. All banks have support/collections departments that work with clients in difficulties.
At the time of writing this the government is working on support for self-employed but nothing yet confirmed.
I applied for a mortgage and am awaiting approval – what effect will the coronavirus situation have on this?
All mortgage applications already submitted are continuing as normal, however you may find a delay with valuations. Physical valuations have been suspended until we’re out of isolation to protect people’s health.
It’s not all over though, some valuations can be done online and this may be the direction they are looking at in the short term.
If I signed off a mortgage the day before the interest rate cut, and now find my house move delayed, can I ask my lender for a revised rate, or be able to cancel that one and look for another mortgage?
You can contact your lender or mortgage broker to find out if a better deal is available as long as this is done before you exchange contracts, so if you have been delayed and are not at the exchnaging contracts stage then yes, this is possible.
However, when mortgage offers are granted it’s based on a snapshot in time (on submission of your application) if you request a new rate the lender can ask to review your circumstances again which could jeopardise your mortgage offer if your situation has changed or the lenders criteria has changed since application.
John is authorised and regulated to give advice. Youcan contact him here:
e: [email protected], t: 01273 007740, m: 07834 594951, w: www.everest-mortgages.co.uk
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE