Why aren't I allowed a repayment holiday?

EJW

I am on an interest only mortgage of 90% and really need to take a month or two off to get myself straight. i have just phoned Cheltenham and Gloucester and was told I couldn't have a break because my mortgage has a lender value of 101% I asked them to explain this as I am totally clueless about such things but wasn't really given an answer. Can anyone explain what this means and also give any advice on what options are available? I am entering into the third and last year of my fixed rate mortgage and am paying 5.99% which equates to £630 per month. Any help would be appreciated. Thanks.

opinions4u

EJW wrote: »

I am on an interest only mortgage of 90% and really need to take a month or two off to get myself straight.

It might help if you clarified this as it suggests you have financial difficulties. From a lenders point of view allowing you to miss payments now could make your difficulties even greater in the long term.

i have just phoned Cheltenham and Gloucester and was told I couldn't have a break because my mortgage has a lender value of 101% I asked them to explain this as I am totally clueless about such things but wasn't really given an answer. Can anyone explain what this means

They are saying your house is worth less than you owe.

For example, if you borrowed £90k on a £100k house, and that house has fallen in value to £89k over the last few months then your mortgage is 101% of the value of your house.

In other words, allowing you to miss 2 payments would increase you debt to over £91k and the house value would not offer them security against this. If they did allow it and then ended up repossessing your home in the future their losses would be even bigger.

and also give any advice on what options are available?

Budget better. Prioritise your commitments with things like food, mortgage and council tax taking priority.

opinions4u

EJW wrote: »

Thanks. I feared as much. I bought the house for £145k and borrowed £126k!
I do budget very well but unexpected charges for faulty heating and vets have left me in difficulty this month.

Once you're through this short term crisis, you may need to look at how you're going to repay your mortgage debt.

It looks to me like you're on an interest only basis. Sooner or later this will come back and bite you where you don't want to be bitten!

Are there any plans in place to repay the capital?

(Ever thought of Pet Insurance or Central Heating Insurance? £20 a month may have covered 'unexpected' bills).

dunstonh

I do budget very well but unexpected charges for faulty heating and vets have left me in difficulty this month.

With respect (and i do mean this politely) that is not good budgeting. Good budgeting is having savings of around 6 months expenditure.

I know its a pain to fall short but over the years, what people consider to be good budgeting doesnt actually match what good budgeting really means.

koexelek

Most lenders restrict payment holidays to those who have a lot of equity in their house these days.

GGGG

...Or have overpaid in the past & hence built a cushion against difficulties which may arise in the future.
Good advice from the other posters here.

maveli

Same with HSBC's life tracker. No holidays even if you over paid in the past.

lukekelly_2

The very short answer is that you're not allowed a holiday because they said so. It's entirely within their rights, and doubtless your contract, for them to do so. Nothing you can do about it. The real question is what you're going to do in your situation. The absurdly helpful Debt-Free Wannabe forum is very likely to be able to give useful support and advice so I'd suggest you head over there.

(I've tried hard to restrain the grammar inside me but have failed. It is "Why am I not allowed a repayment holiday". You say "I am" not "I are".)

Peelerfart

Isn't "payment holiday" a very misleading term ?.

Makes it sound like they're giving you something, when the truth is very far from that

dunstonh

Peelerfart wrote: »

Isn't "payment holiday" a very misleading term ?.

Makes it sound like they're giving you something, when the truth is very far from that

The correct term would be authorised arrears. Perhaps if that was used it would be less frequently requested.

opinions4u

dunstonh wrote: »

The correct term would be authorised arrears. Perhaps if that was used it would be less frequently requested.

Nah, it should be called "limited flexibility to borrow an amount equivalent to your monthly payment subject to agreement at times in your mortgage when it suits us, but not on your nelly if we perceive any hint of risk, falling property values or financial difficulties - and by the way, we WILL charge you interest from now until the end of time on it".

These options are a nice to have and nice to market in the good times, but a liability for prudent mortgage underwriting in the bad times.