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Mortgages & Coronavirus - what you need to know

The coronavirus pandemic has left millions of people in the UK worrying about paying their monthly bills. With many industries having all but stopped, many families are concerned about how they will continue to afford their mortgage during this turbulent period.

To tackle the concerns of homeowners, the government has announced a range of measures designed to support borrowers through the pandemic. If you have a mortgage, here is what you need to know.

To support homeowners during the pandemic, the Chancellor has announced that the government will allow mortgage borrowers to take a three-month ‘payment holiday’.

A payment holiday means you agree with your lender that you will not have to make mortgage payments for, in this instance, up to three months. Payment holidays are there to help you during a time when you may experience difficulties in paying your mortgage – in this case, because of the coronavirus pandemic.

The Financial Conduct Authority (FCA) say: “We expect lenders to offer payment holidays to borrowers who may experience payment difficulties as a result of the coronavirus.”

Buy to Let mortgages also eligible for three-month payment holiday

If you are a landlord with a Buy to Let mortgage you can also take advantage of the mortgage payment holiday scheme. You can also get up to three months where you do not need to make a payment to your lender.

You are eligible to apply if your mortgage payments are up to date and your tenants cannot pay due to financial difficulties caused by coronavirus. Once the payment holiday has finished, your monthly mortgage payment will increase to repay the missed months and additional interest that has accrued.

How to apply for a payment holiday

If you believe that you will have problems in paying your mortgage as a result of the coronavirus pandemic, you should contact your lender. Try and do this in good time before your next monthly payment is due.

You can apply for a payment holiday at any time during this initial three-month period, and your payment holiday will begin once it has been agreed with your lender.

Your lender shouldn’t need any evidence that your income has been affected by coronavirus.

This is not three months’ ‘free money’

It is important to remember that if you take a payment holiday, you will 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.

This means that, at the end of the payment holiday, you will have to make up the missed payments. You can do this by:

  • Slightly increasing your monthly payments

  • Extending your mortgage term by a few months

Rob Griffiths, director of the Mortgage Market Alliance, advises that you ask about the details of the arrangement when you speak to your lender.

Griffiths said: “This is not the lender paying the borrower’s mortgage for them for a three-month period but a deferment of these mortgage payments into the future.

“With that being the case, borrowers should get the detail of any such arrangement and use their mortgage adviser to provide an explanation of what this actually means for them, and to understand what (if any) other options might be available.”

You should also ask your lender how taking a payment holiday will affect your credit score. The FCA is clear on this, saying: “Our guidance makes clear to firms that they should ensure that taking a payment holiday will not impact your credit score.”

Lenders temporarily stop repossessions

During this period of economic uncertainty, the government has also announced that lenders should be expected to stop repossession action in the coming months.

This applies to all mortgage borrowers at risk of repossession, whether or not your income is affected by coronavirus.

During this period, interest will continue to be charged, plus any fees you owe according to your lender’s tariff of fees and charges. This means you could get back less if and when your property is ultimately repossessed and sold by your lender.

If you already have a repossession order on your home, it should not go ahead unless you want it to (for example, if it’s in your best interest because you’ve already made plans for alternate accommodation).

Get in touch

If you want to find out more about your mortgage options during this pandemic, please get in touch. Email or call 0330 043 2906 to find out more.

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