Mortgage Payment Holiday - Good Idea???

Trainee_Bankrupt

Hi All,

I'm new to the site, but could do with some advice....

Basically I'm looking at a 12 month payment holiday on our mortgage, the payments will increase by about £50 pcm at end of holiday.
The reason I'm looking at this is because my business is having cashflow issues at present so I need to reduce my drawings, what with the economical situation at present.

We're not 100% convinced its the right thing to do, but as our credit rating is v.v.poor I cant get a loan or extend overdraft....

Any help greatly appreciated, any other info you need pls let me know!!

Thanks

~Beanie~

It depends who your mortgage is with, some lenders don't allow payment holidays and I'm not sure you can get one for as long as 12 months.

Also if your credit record is v.v. poor, they are unlikely to agree to one anyway as payment holidays are effectively authorised arrears.

Trainee_Bankrupt

Hi, thanks for your reply..

We've applied and been accepted for the payment holiday - just need to sign forms - I'm just not sure if there are any catches other than the payments will increase when we start paying again.

Or if anyone has had any bad experiences??

Thanks

opinions4u

Assuming your lender is ok with everything, you basically need to view this as a source of credit.

You're borrowing 12 x £monthly payment now, and paying back £50 a month for xx years at the rate of interest your lender sets.

The biggest concern I have is that this could indicate the beginning of the end. If you get in to the habit of making no mortgage payments for a year, and your circumstances don't change, how will you be able to start paying mortgage payment + £50 in future?

Are there other ways you could cut household expenses and business expenses.

Trainee_Bankrupt

Thanks opinions4u.... to be honest it feels like the end of the end at the moment!!

We're struggling to pay the bills both business and personal. I've worked a plan out for the business, but it will be easier if I can reduce my drawings (I have 4 employees - so its not just me that is affected by the business failing).

Totally agree with you regarding being able to pay in 12 months time, if we stop the payments I'd be taking £500 per month plus child & working tax credits... not ideal but we dont want to lose the house.

We're also unable to pay creditors on unsecured loans/credit cards, totalling in excess of £30K, tried looking for another job, but nothing available except perhaps supermarket....

I've looked at IVA, but dont have enough income to set one up. Worried that bankrupty is on the horizon....

getmore4less

You are taking on personal debt to support the business

If you are also struggling with other debts, sounds like you have been taking on personal debt to support the business for some time,

How long has this been making a loss?

If you cannot make the business profitable then you are on a downward spiral.

Drastic action is needed to save the business.

Trainee_Bankrupt

Since April we have made a loss for 3 months (£6K total), then broke even in Jul and expect to make profit in Aug.... this is due to expansion. The annoying thing is that the order book is full, with orders worth £20K + over the next 6-8 weeks, but because of the losses there is no cash in the business. We have a shop aswell, which is not thriving in the current climate, I'm confident that we can get back into posotive cashflow in the next 3 months, but need to reduce outgoings where poss.

To be honest, we will either make or break by Christmas.

I appreciate your comments, sometimes the truth is painful but can't be ignored!

opinions4u

Good luck.

getmore4less

Trainee_Bankrupt wrote: »

Since April we have made a loss for 3 months (£6K total), then broke even in Jul and expect to make profit in Aug.... this is due to expansion. The annoying thing is that the order book is full, with orders worth £20K + over the next 6-8 weeks, but because of the losses there is no cash in the business. We have a shop aswell, which is not thriving in the current climate, I'm confident that we can get back into posotive cashflow in the next 3 months, but need to reduce outgoings where poss.

To be honest, we will either make or break by Christmas.

I appreciate your comments, sometimes the truth is painful but can't be ignored!

cash flow is what brings down many business, most need cash to expand.

Depends what sort of business it is on what you can do.

Is there any way to speed up the turn around of orders into cash/profit, perhaps a discount for prompt payment or part payments up front.

If it take time to make stuff, do the smaller orders first and get them shipped less capital tied up in the supply chain. See if you can split big orders to improve cash flow

If the shop is not doing so well perhaps cutting costs there open for fewer hours/days or utilise staff to do other things when not busy, discount slow moving/dead stock to create cash for the profitable part of the business. Only replace very fast moving stock reduce the capital tied up in the shop.

Can you do a deal with staff, to delay some wages(for bonus/time off) to get the orders filled.(risky one this depends how obvious the problem is)

Have you any customers not paying their invoices on time, chase them.

Presumably staff costs are a significant portion of the costs, is there any way you can reduce these so the business scales better when things are slow. I think you said 4 so letting one or two go could save the business.

I would also try to identify where the lowest margins are that tie up a lot of capital and scale those down focus on high margin quick turnaround things.

It's a tough one.