What is a mortgage payment holiday?
Many of today’s mortgages come with a feature known as a mortgage payment holiday. This allows the borrower to, on occasion, delay making a mortgage payment for a set period of time. A mortgage payment holiday must be agreed by the lender and it’s only ever a temporary arrangement.
mortgage holiday
Why would I take a mortgage holiday?
Basically, during months when you know money will be tight, you can take the pressure off yourself a little by deferring mortgage payments and allocating that money elsewhere. For example, to cover Christmas bills, to pay for a holiday, or to get your car fixed.
How long does the mortgage holiday last?
The length of the break will depend on your mortgage lender. For example, Northern Rock allows a one-month payment holiday every year, while Halifax offers up to six months over the life of the loan.
Factors that determine how long a holiday you can take include what lender you’re with, the features of your particular mortgage deal, and payment history.
The downside of mortgage holidays
There’s no such thing as a free lunch – or a free holiday! When you suspend payments, the interest on your loan continues. This means at the end of a mortgage holiday, your mortgage debt will be higher because any unpaid interest will be added. Therefore, when you recommence paying the mortgage, repayments will increase.
Find out more about how to apply for a mortgage holiday.
