Payment Holiday Query?

luckyfool

Jaybee5 wrote: »

I took a 3 month payment holiday with NR 3 years ago whilst on maternity leave so that I could extend my time off. There were no adverse effects to my credit report. The only consequence was the addditional cost.

This is not necessarily definitive though. Lenders are now sharing much much more information with the credit reference agencies now than they were 3 yrs ago. Even so, how do you know it did not effect your credit report? Did you do a search before and after the holiday, was the holiday not shown at all are do you assume that just because it did not show as arrears it was not an "adverse" effect? Or do you assume because you were not later declined for credit the holiday did not impact on your report?

jamesd

If you want another £3,900 why not do it the safe way, by asking the new lender for £3,900 more than the current mortgage balance?

Mortgage lenders can and do ask for extra information like more recent copies of payslips and bank statements before providing funds. Happened to me about a week before completion, after exchange. It's a safe bet that they also made new credit searches at the same time. A human will notice that you haven't been making payments, both from a look at your bank statements and from seeing the lack of payments in the credit report. Be sure you can answer when asked about it.

mortgageconfusion

Guys. thanks for all your help on this. I have just spoken to NR for 40 mins and am still not 100% sure or convinced. They are saying that as I am taking a payment holiday then leaving them there is a loophole which means I am better off. They do not put it on a credit report as if I stayed with them they recalculate the payment let me explain as I want to do it and am not sure.

They are saying the following


my mortgage payment is £1287. If I took a 3 month break my payments would go to £1307 for life of loan ( I get this as I am paying to essentially borrow more money) and should pay back £20 more per month.

If I leave its a different story.

my balance is 212000 and if I keep paying my balance my balance when i leave in april will be 210500
If I took a 3 month break I would have in my pocket (£1287x3) which equals £3861.
What NR are saying is they would then add £921 interest per month to my balance (3x921= £2763) and then add that to my balance of my loan (the capital is not affected by me not paying it, they swear blind the balance of the loan changes by £921 only and even went through it all over the phone 3 times. As by april I would have had 3 months more paid off it (my mortgage goes down about £300 per month on the capital side) so 212000 - 3 months capital = 211100 plus 3x921 = 213863.

my point is if I dont do it I will only owe them 210500 but will have paid for 3 months (1287x3= 3861) which totals £214361
If I do take the hol I will have a bigger settlement at 213863 but I will have £3861 in my pocket so that net affect is I am about £498 up and I have got £4k to use for other things or an overpayment on my new mortgage if I dont need the money

I have asked 3 different Northern rock people this today and got the same answer on every call. They all state that its a condition of the loan, they dont let equifax etc know as its an agreed deferrment and there is no catch. They all told me as I was leaving NR thats why it seems to work in my favour.

I can understand I might get a leaving statement to show I paid zero for 3 months which the new lender may see but other than that I still want to do it.

Does this clarrify things or just open a can of worms??

jamesd

Why would your loan balance decrease by £300 per month when you're not making the payments?

You pay normally. Start with 212,000 and make three payments that take off £900 and you end up with 211,100 and no extra interest.

Now take the payment holiday instead. Start with 212,000, balance stays at 212,000 (no £300 per month reduction), add 3 x 921, new balance 214,763.

Compare the two:

Mortgage balance higher by £214,763 - £211,100 = £3663
In your pocket higher by 3 x £1287 = £3861

Better off by £3867 - £3663 = £198.

More in your pocket, more owed on the mortgage, net gain to you, though I simply don't believe that they will do this in a way that produces a net gain, I think they will correct the calculation at mortgage closure in some way.

But it's easier to get that just by asking the new lender for a bit of extra money.

It seems that you're assuming that your mortgage balance is somehow going to reduce by £300 a month even though you aren't making any payments. They aren't just going to give you £900. It'll show up in the mortgage closure statement giving the amount the other lender is expected to pay.

mortgageconfusion

thanks james.

If my mortgage has gone up by £3663 and I have £3861 in my pocket how is this a net loss?

I am not assuming the £300 is not paid for the 3 months. I understand how that works etc but I was trying to keep it relatively simple on here so I could get some help understanding thats all. The figures I quoted are right though.

It has helped as you have pointed out the obvious. get 4k more off the new lender if I need it rather than do it this way as then there is no possible credit reports about the holiday.

That makes complete sense. Thanks

jamesd

Worse off was an error by me in that description. I still don't believe that you'll be better off, I think there's a glitch in the calculations or numbers somewhere.