Need to ask a question re payment holidays

Hazel673

Can someone explain this to me please.

In november, following my husband having an operation and looking at quite a long time off work, we phoned Halifax, our mortgage lender, and requested a payment holiday of 3 months. It was explained to us that in doing this we would still be charged interest on the mortgage amount even though we ere not paying it.

Just received a letter today to remind us that our payments will be starting again in february at the slightly higher amount we had been told already. So far so good.

What i didn't understand was how our mortgage amount had increased. I phoned Halifax and asked them, and i was told that this is because the payments that we would made in the last 3 months having been added on to our mortgage - totally approx 1800 added. I don't really undrstand this! I may be oversimplfying but the way i saw it was that we'd borrowed money and we're paying it back plus interest in our monthly repayment. All we did was take a break from making those payments (i thought) not borrow the extra to make the payments?! Please someone explain it, coz it just doesn't make any sense to me. Thank you in advance.

feisty1

I think u must have thought u could borrow the money "free" for 3 months, you didn't borrow extra, but u do still have to pay for those 3 months, maybe u thought they extended yr mortgage by 3 months??......but how they have explained it, is correct

Hazel673

ok. thanks for trying to explain it but i still don't really get it! I just wanted confirmation that it was right and i'll stop worrying about it now. It is what it is. x

feisty1

Interest still accrues and any missed interest payments (3 months "holiday") will be added to your overall mortgage, resulting in increased contractual monthly payments.

Hope this is clearer!

Nonshy

if you have a balance of £100,000 and are getting charged £600 interest a month, then when you take 3 payment holidays that 3 months interest is added to the balance... so your balance becomes £101,800.

Your term still decreases by 3 months... so if 10 years left after pay hols would have 9 years 9 months remaining

Mortgage before pay hols:

£100,000. 10 years

after pay hols:

£101,800. 9 years 9 months

So your bigger debt then has to be paid over the shorter term.

It is not "interest free" and the mortgage is not extended by 3 months.

Hope that clarifies it a bit more for you!

Hazel673

Much clearer. Thank you both. xxx