Taking a Mortgage Payment Holiday

Weedy

Does anyone have any information about the pros and cons of taking a mortgage payment holiday for upto a year. I'm due to start maternity leave soon and would be eligible to take a mortgage payment holiday and am very keen to give ourselves a 'breather' as money is very tight and we are slipping more and more into overdraft already even before my money drops, but I was just interested in a general view of the option, in principle.
Thanks, Weedy.

Little_Miss_Saving_Money

Hi Weedy,
Sorry I can't answer this one but I am sure somone on here will be able to advise you. If not, why not have a chat with your mortgage provider. Best wishes for your pregnancy, good luck

dunstonh

Authorised arrears, as they effectively are, shouldnt be considered a holiday. Yes, you dont pay the mortgage for a month or two but the amount you would have paid is added to your mortgage and you end up still having to pay it back along with the extra interest on that amount. Plus, when you restart the mortgage payments, you have a shorter term so the monthly payments will be higher than they were before you started the holiday.

So, you may get a short term gain but it may come at the expensive of long term pain. Especially if mortgage interest rates do go up as expected in the next year or two and your mortgage payment doubles from its current position.

If you are struggling now with interest rates at an all time low, then its probably worth taking a much wider look at your finances as you are really going to struggle when the mortgage starts increasing. You should take a look in the debt free wannabee section on this board as they have some great people in there to help those who have financial problems like yourself.

The first thing though is to realise you have a problem and catch it early on if you can.

Weedy

Thank you for your responses. We are on a fixed rate mortgage of 5.34% with another 2.5 years to run, so although interest rates are low we aren't really seeing the benefit on our mortgage repayments. I've always liked to be able to plan and fixed rates have suited us. That's the way it goes I suppose!

Thanks for the comments, I will take a look at the other forum and what you've said has already given me more to think about.
Weedy

jamesd

Taking the mortgage payment holiday seems like a good idea compared to increasing the overdraft. Dunstonh seems correct about your general financial situation sounding high risk, with both a decrease in income and increase in expenses coming.

It seems that a maximum mortgage holiday term may give you some opportunity to accumulate savings. Those savings can be used to allow you to keep up with the mortgage minimum payments in the future, either when the rates increase or when your income drops and expenses rise. That will provide you with some protection from repossession risk.

It's vital that you don't simply spend all of the money that won't be used on mortgage payments, or you'll end up in an even more high risk situation than your current one. The savings come at the expense of paying interest on the money, which is effectively being borrowed from the mortgage. That's not good but it's worthwhile to have the savings to let you keep up with the minimum payments until you can restart work.

opinions4u

jamesd wrote: »

Taking the mortgage payment holiday seems like a good idea compared to increasing the overdraft. Dunstonh seems correct about your general financial situation sounding high risk, with both a decrease in income and increase in expenses coming.

It seems that a maximum mortgage holiday term may give you some opportunity to accumulate savings. Those savings can be used to allow you to keep up with the mortgage minimum payments in the future, either when the rates increase or when your income drops and expenses rise. That will provide you with some protection from repossession risk.

It's vital that you don't simply spend all of the money that won't be used on mortgage payments, or you'll end up in an even more high risk situation than your current one. The savings come at the expense of paying interest on the money, which is effectively being borrowed from the mortgage. That's not good but it's worthwhile to have the savings to let you keep up with the minimum payments until you can restart work.

I must say, this is an excellent post.

jamesd

Glad you thought so. It's hard to justify borrowing more on a mortgage but sometimes it's a useful way to get protection against the medium term repossession risk even though it involves paying for the money.

kattwood

Weedy

I asked almost the same question on a different post and got nothing but abuse so its nice to read your post with some friendly HELPFUL comments.

We are in the same situation but I only want 6 months, I contacted C&G and because we haven't been with them for a year they wont even consider the break until May (a month before my baby is due)!!

When you are pregnant (as you well know) its comforting to plan ahead financially so you can take as much time with the new addition and not have to worry about money.

x

jamesd

kattwood, glad you found this more helpful. I don't personally have experience of pregnancy but I do know that I don't like the thought of not having the financial arrangements, including plenty of safety margin, in place!

kattwood

Thanks jamesd x

Weedy

Hi Kattwood
I certainly do understand the need to plan. It seems very hard that they won't even give you the general principles to see whether or not you'd be eligible. Is it tucked away anywhere in the original mortgage Terms and Conditions paperwork?

With ours (Nationwide) one of the criteria (that I can recall from phone conversation) was having a LTV of 80% which seems to be quite common.

I'm having second thoughts about applying. I'm scrutinising our budget at the moment to see if there is anyway we can cut back on supermarket and petrol, two key areas that just seem to drain money! I really hate the idea of the payments going up quite significantly afterwards (which I hadn't initially realised) and experiencing the long term pain that dunstonh highlighted in this post.

Good luck with your planning and all the best with the birth of your next baby.
Best wishes
Weedy