Maternity break on fixed term product

MrsSippi

I wonder if someone could help with a query I have for a friend of mine as I am not sure of the answer.

She is literally days away from completing on her first home with her partner. She has had all the mortgage documentation from the mortgage company and should complete on Friday. She has a fixed rate for the first 2 years of the product (I think it then transfers to a SVR but I am not 100% sure). Anyway she is also hoping to fall pregnant in the next 6-12 months and wasn't sure how this would affect the payments during the first 2 years fixed rate period in light of the fact that she would be entitled to a 6 months maternity break on the mortgage.

Does anyone know? I hope this makes sense. If she took a maternity break during the SVR (or whatever) obviously it would mean she would see an instant increase in the payments once they resumed but how does this work for a fixed term product? Can they increase them?

I know she could probably ask the mortgage company but as this is all hypothetical at this stage I thought someone on here might know.

Goldiegirl

The payments aren't affected by pregnancy.

The interest rate stays the same whether she gets pregnant or not in the two year fixed rate.

All the lender is bothered about is that she makes the payments.

They are not bothered if she's pregnant.

They will be bothered if she doesn't make the payments. So if she's not going to be able to afford to make the mortgage payments due to maternity leave, then perhaps she'll consider whether having a baby at that time is prudent or not

If you are asking whether she can have a payment holiday during the maternity leave, she'd have to ask the lender.

MrsSippi

Goldiegirl wrote: »

The payments aren't affected by pregnancy.

The interest rate stays the same whether she gets pregnant or not in the two year fixed rate.

All the lender is bothered about is that she makes the payments.

They are not bothered if she's pregnant.

They will be bothered if she doesn't make the payments. So if she's not going to be able to afford to make the mortgage payments due to maternity leave, then perhaps she'll consider whether having a baby at that time is prudent or not

If you are asking whether she can have a payment holiday during the maternity leave, she'd have to ask the lender.

Thanks for the reply. Readingmy original post back I don’t think I was clear. So if for example her monthly payments while on fixed rate were £650 and she then went on a payment break for 6 months within the fixed rate period, when the payments resumed after 6 months would she still pay £650 for the remainder of the fixed term or would it increase slightly to cover what she hasn't paid while on her payment break?

lisyloo

She needs to confirm with the mortgage company.

However it is ONLY a payment holiday, not an interest holiday, so the interest will still be charged and the longer it's put off the more expensive it gets.

If she needs to borrow money for very basic living costs then I would advise that she re-considers her family planning or the purchase or both.

haras_nosirrah

not all lenders allow a payment break for maternity leave - which lender is it

if she is with a lender who is not flexible then she will have to pay £650 a month regardless of whether she is on maternity or not and should wait until she can afford to pay this from her savings.

If she is with a lender who is flexible then her remaining payments will increase to cover the period she wasn't paying. They will still charge interest while she is not paying the mortgage

ethank

Most lenders that offer payment holidays only do so where you have overpaid the mortgage.

Goldiegirl

MrsSippi wrote: »

Thanks for the reply. Readingmy original post back I don’t think I was clear. So if for example her monthly payments while on fixed rate were £650 and she then went on a payment break for 6 months within the fixed rate period, when the payments resumed after 6 months would she still pay £650 for the remainder of the fixed term or would it increase slightly to cover what she hasn't paid while on her payment break?

Oh, I see what you are saying.

At the end of the six months the monthly payment would be recalculated on the interest rate that was in force at the time.

So if the fixed rate was in force, they'd use that interest rate. But the monthly payment wouldn't revert to £650. The mortgage debt would have increased as no payments had been made for six months. So the new monthly payment would be worked out on this higher debt, to repay the mortgage within the original term. In other words the monthly payment would be higher.

This is assuming the lender would agree to a payment holiday. She'd need to check with the lender, before she got pregnant.

I don't want to get into family planning advice on a financial board ...... But maybe she'd be better off waiting a bit longer before starting a family?

Edit - I see your OP said she was ENTITLED to a six month maternity break on the mortgage. Is this in the terms and conditions? Just that I've never heard of a mortgage product with this entitlement

Thrugelmir

MrsSippi wrote: »

in light of the fact that she would be entitled to a 6 months maternity break on the mortgage.

Why would she be entitled? Such matters are at the lenders discretion.

MrsSippi

Goldiegirl wrote: »

Oh, I see what you are saying.

At the end of the six months the monthly payment would be recalculated on the interest rate that was in force at the time.

So if the fixed rate was in force, they'd use that interest rate. But the monthly payment wouldn't revert to £650. The mortgage debt would have increased as no payments had been made for six months. So the new monthly payment would be worked out on this higher debt, to repay the mortgage within the original term. In other words the monthly payment would be higher.

This is assuming the lender would agree to a payment holiday. She'd need to check with the lender, before she got pregnant.

I don't want to get into family planning advice on a financial board ...... But maybe she'd be better off waiting a bit longer before starting a family?

Edit - I see your OP said she was ENTITLED to a six month maternity break on the mortgage. Is this in the terms and conditions? Just that I've never heard of a mortgage product with this entitlement

Sorry, maybe ENTITLED is the wrong word to use. What I mean is that she is allowed to have a break from paying the mortgage for 6 months while on mat leave, it does state this in the terms and conditions, it just doesn't say how the outstanding debt is allocated after this time. I think this is fairly normal. I know I did this myself when I was on mat leave a few years ago. I had to provide a maternity certificate provided by the midwife and then I was allowed a 6 month break in my payments, regardless of how long I was on mat leave. So in my case I was on mat leave for 8 months but had to pay 2 months at the end before I went back to work. I can't remember how it worked when I did it.

I think she could afford to pay the mortgage while not working but it would be easier for her if she didn't have to. I think at this stage she is just looking at her options (as I understand it anyway).