Money Moral Dilemma: Should we take a mortgage holiday even though we don't need one?

MSE_Kelvin

This week's MoneySaver who wants advice asks...

Our lender has offered us a mortgage holiday due to the coronavirus crisis, but we're not struggling financially as neither my wife nor I have been furloughed, and we're unlikely to be. But we're considering the holiday anyway and instead using the money to pay off more expensive debt. 

Unfortunately the MSE team can't always answer money moral dilemma questions as contributions are often emailed in or suggested in person. They are intended to be a point of debate and discussed at face value. 

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calcotti

I can't see that there is a moral issue in this. A mortgage holiday is not free. By deferring payments you increase the total interest you have to pay later. if you don't need it, it isn't, in my opinion, logical to take one - but that isn't a moral question.

Grumpy_chap

Agree with @calcotti - not a moral dilemma, purely a financial choice.

A mortgage holiday is not free, but if all the costs are known and understood (for the long term) and paying off more expensive debt will be cheapest overall, then take the mortgage holiday.  If it is cheaper overall to keep paying the mortgage and clear the higher-rate debt over a shorter time frame than the mortgage term, then don't take the mortgage holiday.

Thrugelmir

Far too little information to make any constructive comment. As above, not a moral issue. As in no way a free lunch. Repaying a holiday over many many years isn't a sensible manner to manage your finances. Nor does it resolve the underlying issues. 

REJP

No dilemma here.  Common sense decision is that if you take the offer, and have to pay back later with more interest, then don't take the offer.
You say you can afford to pay, then say you have debts.  Pay up and get debt free.

kilburn_94

I’m in a similar position to the original poster, the main difference being that we have an offset mortgage which is fully offset, so no interest payments. Our other debt is also interest free, the main reason for a payment holiday would be to retain the cash in our offset savings so we have a bigger deposit for our next house. Would a payment holiday be a smart move in our position? (We also both have clean credit history)

calcotti

kilburn_94 said:

...the main reason for a payment holiday would be to retain the cash in our offset savings so we have a bigger deposit for our next house. ..

You’ll also have a bigger pre-existing debt.

wmp92

My bank asked me to confirm that I was affected by covid-19 when applying down the payment holiday and that I wasn’t having financial difficulty before covid. So if they were applying to a bank like this (Halifax) then it would be a moral issue in my opinion.

Otherwise, I would take it.

Dangerous78

We have taken a payment holiday for the anticipated impact. We have relatively low debt, a good credit rating but no savings. There is a chance we’ll suffer redundancy through this pandemic. If that is the case we have put the money aside to give us a cushion. If we don’t need it we will likely pay a lump sum back as allowed under the terms of our mortgage. This will undoubtedly mean net net we pay more interest but it feels worth it for the peace of mind should the worst happen. 

dunstonh

I agree. No moral issues here.   Mortgage Holiday =  authorised arrears which end up costing you more.   

However, using it to clear short term expensive debt and then overpaying after could be a very good idea.

Matt8888

MSE should probably not have chosen to use this question because it implies that a mortgage holiday is free, especially if people just read the question and don't read the comments posted.