A Viewpoint on Mortgage Payment Holiday

You can arrange with your lender a mortgage payment holiday that permits you to stop your monthly mortgage payments temporarily. The mortgage deal, your circumstances and the discretion of the lender determine your eligibility for the option and the length of the payment holiday.

Nature of the Mortgage Package

Most flexible mortgages allow you to take a mortgage break at any time and the features of the package do not constrain you to justify your action to the lender. A few traditional products allow mortgage holidays, as well. However, lenders insist on your making overpayment for a period until you establish adequate equity in your home to take care of a brief respite.

Your Financial Condition

You may request your lender for a mortgage payment holiday, should you experience financial problems due to an illness or redundancy. Most lenders do grant the request, but impose certain restrictions on the borrower.

Qualifying for a Payment Break

Lenders require a borrower to make payments on schedule for a minimum period to be eligible. This may range from six to twelve months. You must meet the limit for loan to value ratio set by the lender. Most lenders do not allow payment breaks, if the loan to value ratio is greater than 80%. You may have a greater chance of qualifying for a break, if you have developed a history of overpayments in the past.

Organising a Mortgage Payment Holiday

You must check if the terms and conditions detailed in your mortgage allow you a payment holiday. Deliberate on whether a break from the mortgage repayments is suitable for you. It is crucial to consider that you will need to pay the interest on the outstanding mortgage for the period of the break after the payment holiday is over. In other words, the mortgage payments will go up after the break. It is advisable to perform necessary calculations before deciding to go ahead with a payment break. If a payment holiday is necessary, apply with your lender for an approval. Your lender will scrutinise your payment history and other details before agreeing to a break.

Vital Considerations

A borrower facing difficulties in mortgage repayments should consider a mortgage payment holiday as a last option. A break in loan repayments could bring a temporary respite but could lead to a financial crisis later. Discuss refinancing and other options with your lender before settling down to a mortgage payment holiday.

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