Mortgage relief, put pay the interest?

Cajunjay

Hi
I want to apply with my bank for a 3 month mortgage break but its somewhat confusing.
Im with natwest btw and it says that they will add the 3 months of relief onto the mortgage instead of adding 3 months onto the end which is fine.
What confuses me is that they will still charge interest for those months and as Im only 2 years into a 25 year mortgage the interest isnt far away from the full amount to pay anyhow. So how is this even helping us? 

Hopefully Ive gotten this all wrong but after the 2 years we have been paying the mortgage we knocked off say 5k from the borrowed 150k so the interest is mostly all we are paying currently.

kuratowski

The 3 months' worth of interest will be spread over the remaining 23 years, so it won't add much to your monthly payment.  You didn't say what your interest rate was.  If it was let's say 2% then it would add about £6 a month, roughly.

Cajunjay

Thanks for the reply, I was hoping it wouldnt add much like you said.
My mortgage rate is fixed for 5 years at 3.04% so if you dont mind how much extra a month would that be roughly?

kuratowski

About £6 a month extra, to the nearest £.  This is only an approximation.  Natwest should tell you the exact amount for your new payment.

You need to be aware that taking the payment holiday does (slightly) increase the total interest cost to you over the life of the mortgage.  The benefit is you get 3 months' breathing space without making a payment.

Thrugelmir

£9 or thereabouts month. 
More importantly you will have added another £1100 to your mortgage. At the same interest rate that will cost you £430 in interest over the remaining 23 years 

kuratowski

For clarity I'm not purely quoting the extra interest, it's actually the total impact on the monthly payment of taking 3 months' holiday and spreading them over the remaining term.

Cajunjay

Thanks guys makes things allot clearer.
"More importantly you will have added another £1100 to your mortgage. At the same interest rate that will cost you £430 in interest over the remaining 23 years "
Hmmmm so you mean instead of paying back 430 i will now have to pay 1100 back over the course of the mortgage or do you mean an extra 1100 regardless?

dimbo61

Both !
You will pay an extra £430 in interest over the next 23 years and owe £1100 extra after your three months mortgage holiday !
So painful and who knows how this will look on your credit file when you come too remortgaging.
Well done on getting a 5 year fix at a good rate.
Once things have returned to normal try and overpay every month

Thrugelmir

Cajunjay said:

Thanks guys makes things allot clearer.
"More importantly you will have added another £1100 to your mortgage. At the same interest rate that will cost you £430 in interest over the remaining 23 years "
Hmmmm so you mean instead of paying back 430 i will now have to pay 1100 back over the course of the mortgage or do you mean an extra 1100 regardless?

In excess of £1,500 in total. That's on the basis that interest rates don't rise in the next 23 years. 
As you've identified. Your mortgage payments consist predominantly of interest in the early years. There's no free lunch. 

amnblog

Think it it as borrowing an extra 3 months payments from your Lender.
That, in a nutshell, is the mortgage payment holiday offer.