Mortgage Repayment Holiday, yes or no?

kindofagilr

Hi all,

My mortgage payment is £618 a month on a rate of 6.29% we are locked in on this rate till April 2014

I am on maternity leave at the minute and am currently getting full pay, but come Sept I go onto SMP which is only £532 every 4 weeks (my salary is £1092 a month, so quite a drop)

I called C&G and told them I was on maternity leave and wanted to know more about a repayment holiday

They said we can have 1-6 months holiday but can only do this once every 3 years, she couldnt process it yesterday as my June payment has been requested and she cant amend computer, so I have to call back after June 3rd.

I just wondered if you all thought it was a good idea, I am currently saving my CHB £20 a week and TC £20 a week to cover for my salary drop in sept

But we are in our overdraft to £1000 and although we arent spending on our CC's anymore they are kinda crippling us (with the interest, I cant switch them anymore, they are all in my name I have 4, cos OH has the loan we have in his name which has 19k left on it and virgin refused him a card already so I am not going to try for him anymore).

So I thought if I took a repayment holiday for 6 months then that gives us £3708 to pay off overdraft and about 25% of the CC's making when I return to work part time us better off if that makes sense?

Also as I am saving the TC and CHB by the time I return to work I will have saved £1720 so could use that as well making our CC's nearly gone (at the minute we owe about £9000) well not nearly gone lol but some of the way there.

We have two loans a car loan which is ending July 2014 and a big loan ending April 2016 which we can afford with our mortgage but its the CC's thats making us spend all our pay each month

Sorry for rambling on

opinions4u

You are basically looking to take a loan of £3,708 against your property - effectively offering up your home as collateral for debt that is currently unsecured. You will then be repaying that debt over the remaining term of the mortgage.

It can have a sexyish name like "payment holiday" or "flexible mortgage arrangement" but there is nothing sexy about debt.

Two key questions to ask:

- what's the rate on the payment holiday (is it the SVR of 2.5% or is it the higher fixed rate)?

- how do C&G report the missing payments to the credit reference agencies (is it in any way derogatory to your credit rating)?

After you have answers to that, you can make a better informed decision.

On the whole, I dislike payment holidays and I dislike securing unsecured debt. There can be circumstances where it is the right thing to do and it's more than possible that you are in that zone.

While it's of no use now, I really do think that you could and should have planned the finances around maternity leave in a smarter way several months ago (ideally pre-conception). That said, you are where you are. I would suggest visiting the Debt-free Wannabe section of the board to identify ways to maximise your income and minimise your outgoings even further from now on.

It would be fantastic if you could raise your son in a debt-free environment and teach him the benefits of saving up for the things he wants.

Good luck.

kindofagilr

Yeah I see what you are saying.

I should have said that we did plan our baby and we did plan our finances, waiting till we were debt free in 2016 wasnt a option, I would be 35 then and I wanted kids when I was younger.

Also if I find that we cant afford for me to be on SMP (which we can at the minute) then I can easily call my boss and tell her my date of return needs to change to sooner than Jan, they only need 4 weeks notice to a change in return date.

I just thought that maybe if we took a "holiday" then it would help us pay the CC's off quicker than we are.

The "holiday" wouldnt have a detrimental effect on our credit. The rate was £520 (thats the interest on each of our mortgage payments) they said for however many months holiday we took that was going to be added to the total mortgage we have left and the payments would go up slightly once the holiday is over.

Thats what we are hoping to do, we will hopefully have the CC's and both the loans will be paid off by April 2016 when Elliot is only 6, then we can start saving for holidays etc and the things we want and teach him the value of money (the only debt we will have by then is the mortgage which is currently 91k)

getmore4less

A payment holiday just moves debt around.
If they will let you go interest only that may be a better option rather than rolling up the interest which is a form of consolidation.

You have been living ahead of your income for some time to have
big loans, OD and CC debt.

Have a look at debtfreewanabee put togethter a proper plan to be debt free.

Do a SOA that has you living on less than your income,

Look up snowballing and make the mortgage holiday part of a proper debt reduction plan.

With an interest payment of £520 @ 6.29% thats roughtly a £100k mortgage you say £91k why the difference.

£618 @ 6.29% on £91k is 283 months about 23.5 years

to pay off £94708 in 23 years is £650 so payments go up by £32pm


Car loans are usualy a problem if you are not saving for the next car you end up in a debt cycle.

poppy10_2

Yep. No point in having a mortgage payment holiday and paying off your credit cards if you don't address the underlying problem of spending beyond your budget. You'll simply run up more debts on top of the debts you have moved on to you mortgage. The DFW board is very good for giving constructive feedback on your budgeting.

wymondham

Sounds like you need to step back and look at your finances generally. Go to the DFW board and see if you can reduce your outgoings elsewhere....

kindofagilr

Thanks for your opinions guys, I'll take a look and try to do a SOA