mortgage payment holiday or loan?

sweaty_betty

I'm usually fairly good with money, but have a tricky time coming up.

I discovered I was pregnant earlier this year and figured that if I saved carefully until my due date I could afford to take 6 months maternity (as I did previously) - my partner's money is used to pay for other fixed costs and so I'm looking at covering the things I usually pay for, although he's also looking for ways to cut back as we're obviously in this together.

However, my baby arrived very early (24 weeks) and, along with the obvious worries about him, his health and prognosis etc, my mat leave started 3 months earlY so I've 3 months less savings than i'd planned for. Also, I now can't see myself going back to work until my baby is 9 months old (ideally longer, but I'm being realistic). So I'm facing longer without my "usual" income and without the savings I had planned.

I'm quite savvy about living frugally and will be putting a hold on non-essential things like pension contributions etc while I'm off, but the mortgage is a big outgoing that I can't afford on smp. So I'm thinking of either taking a mortgage payment holiday or taking out a loan to cover this for 6 months. However I have no idea what the criteria are for either, if it would be possible to this under these circumstances or which would be the cheapest thing to do (mortgage is 3.3%).

Can anyone give me some advice?

BrassicWoman

I would ask on the mortgages or loans board - I think you need a big maths brain, not relationship advice?

Lunar_Eclipse

A mortgage holiday will be substantially cheaper.

Where would you find a loan for less than 3.3%?

Do you have any other options? Parents that could help out, items you could sell to increase income etc?

Congratulations on the arrival of your son. I hope his health improves and wish you all the best.

BigAunty

Have you checked your entitlement for things like tax credits and council tax discount? Use the Turn2us benefit calculator or ask on the benefits forum.

Littlebettyboop

Yep I would suggest the mortgages board or loans board, but I would have thought a mortgage break would be more beneficial than a bank loan. Then again, I believe taking say, 6 months off paying your mortgage can add an extra year and a half to the term.

By the way, I am happy to be corrected on this by someone who knows more than me. I only say this because when we wanted to take a 6 month mortgage break about 10 years ago, we were told it would add a year and a half to our term.

Congratulations on the birth of your baby by the way. I hope he will be OK. 24 weeks is very early.

I also agree with Big Aunty, that you should check for any additional benefits you can get.

annannanna

I tried to take a 2 month payment holiday when I was on maternity leave but was refused by Halifax as the equity in my house was slightly too low.
I would check your banks requirements, some banks are a lot stricter than others.
I ended up taking agreed arrears for 2 months and just paid slightly over half the mortgage amount, as the arrears was less than a whole months payment it didn't show on my credit report.
I also built up savings before I went off and took out a credit card to see me through as I wanted a whole year off.

skint_chick

It depends on how much you'd need to borrow. If you do decide to go with the personal loan maybe try and find a flexible one that allows overpayments so you can pay it off without penalty quicker if you find you have spare cash. If you only need to borrow a few thousand this might be a cheaper way of doing it as although the interest rate would be higher you would be repaying it more quickly than the rest of the term of your mortgage.

The best place to start is to enter your mortgage payments x payment holiday length here along with your interest rate and remaining mortgage term.
http://www.theguardian.com/money/mortgage-calculator

Then do the same with the personal loan amount and term. It shows you how much interest you would pay on both, which will give you an idea which would be the better plan.

For example say you needed 5 months off at £1,000 a month, mortgage has 20 years left

£5,000 over 20 years at 3.3% is £1,837.60 taking a mortgage payment holiday if your provider adds the amount to your balance and the mortgage is repayment - plus your payments go up £28.49 a month. Some lenders just add the amount to the term and you don't pay the extra £5,000 back until the end, which could cost you up to £3,000 extra in interest over the term.

Personal loan of £5,000 at a typical rate of 4.5% even over 5 years would be £93.22 a month and interest of £593. Plus if you have a flexible loan you can pay more than your monthly payment and reduce the term and the amount of interest you pay. It's significantly less than taking a payment holiday but only works if you can afford the additional loan payment.

I would speak to your mortgage lender first and see if you would be eligible for a payment holiday and how it works then post on the mortgages board with details of how much your payments are and how long a holiday you are considering.

sweaty_betty

Thanks for all your replies (and good wishes) - I shall speak to my mortgage company and go from there.

Cheers

silvercar

When speaking to the lender, check how they record mortgage holidays, some have been known to mark them in such a way that they impact your credit rating.

tyllwyd

Another alternative to taking a complete mortgage holiday might be to extend the term of your loan to bring the payments down.

peachyprice

Or even go to interest only for a while.