MORTGAGE PAYMENT HOLIDAY - DID YOU KNOW THE TRUE COST?

Since March 2020, over 2.9 Million Mortgage Payment Holidays have been approved in the UK.* The vast majority of these have now come to an end and borrowers have to restart paying the extra costs. But how much are these extra costs? You probably only know your new monthly payment!

     Did You Know?

  • The Total Cost of Your Holiday - not just the new payment?

  • You might not be able to repay your mortgage at the End?

  • How much is added that increases hidden costs?

  • Future rate rises will increase the Cost of Your Holiday?

  • You might not be able to re-mortgage to a better deal?

  • Making some payments would have saved you money?

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Total Overall Cost of your Mortgage Increases

Your Lender added any unpaid interest from the holiday to your mortgage balance. This means that you will be paying interest on it for the rest of the mortgage. So you will be paying INTEREST ON YOUR MISSED INTEREST! This can add thousands of pounds extra to the total you will repay over the rest of your mortgage. Our True Cost Calculator will tell you how much extra in TOTAL you will pay at current rates - not just the additional monthly amount which can seem quite small!



You Might Not Be Able To Repay Your Mortgage At The End

Interest Only Mortgage - If you remain on Interest Only after the holiday to keep your new payment as low as possible, you will not be paying off the arrears added to the mortgage. When the time comes to repay the mortgage, the balance can be thousands of pounds more than you expected. If your repayment plan was setup to repay the previous balance from before your holiday, it will now be insufficient to repay this higher amount. How will you pay the shortfall? Your home may be at risk if you cannot repay your mortgage. Our True Cost Calculator will tell you how much extra your mortgage balance will be at the end.



Your Life Insurance Might Not Payout Enough To Repay The Mortgage If You Die

Any life insurance that you took out to pay off the mortgage in the event of your death will have been set to payout a specific amount. Usually, that amount would track the balance of your mortgage so whenever you die, you have the security of knowing the mortgage is paid in full. The addition of holiday arrears means the mortgage balance you now owe will exceed the amount of payout from your insurance. So you will probably need to check with your insurer and increase the level of cover needed to repay the higher mortgage balance. Our True Cost Calculator will tell you how much extra cover you might need to arrange.



You Might Not Be Able To Re-Mortgage (or pay much more to do so)

Re-mortgaging to a cheaper deal can be a great way to save money. This generally happens when a discount or fixed rate period ends. A very important factor comes into play when re-mortgaging - Loan To Value (LTV). This is a figure which shows the amount you want to borrow as a percentage of the value of your home. Lenders base the deals they offer on the LTV. The higher the LTV, the more you will pay in fees and interest rate. The best deals are usually available below 60% LTV, rising in cost at 10% increments to a maximum of 90% LTV. Very few lenders will consider lending if over 90%. So if your mortgage balance before the holiday was close to a 10% threshold and it crosses as a result of adding holiday arrears, this could mean that you will pay more for your re-mortgage than if you had not taken the holiday. Our True Cost Calculator will tell you if you have crossed a Loan To Value Band so you can take steps to reduce your LTV for re-mortgaging. ​



Future Rate Increases Mean Your Holiday Costs More

Your lender provided you with the new monthly amount after the holiday. This new payment includes paying off the unpaid amounts added to your mortgage. When interest rates change in the future, so will the amount you are continuing to pay for your holiday. Nobody knows what interest rates will do in the future so the total cost of taking your holiday is actually unknown. The figure we provide uses current rates. Our True Cost Calculator will show you how much the Total Cost will increase as rates increase.



* www.ukfinance.org.uk