Payment holidays and selling house

Katitka1

Good morning, 
I would like ask about if Its a good idea to extend my payment holiday for another month (we had two months) as we have just accepted offer on the house so  hopefully the house sale will be completed in next 3-4 months (cross fingers) The mortgage will be paid off, and at the moment it's only interest being added on the mortgage. I'm not sure about if another month of payment holiday will making any difference in saving money or it doesn't really matter. Thank you for your help. 

bucksbloke

Do you have a repayment mortgage or an interest only? If you have repayment mortgage - you have to make up missed repayments and interest at the end of the holiday, plus extra interest on the missed payments. 

Katitka1

We have repayment mortgage, but as we have taken out the payment holidays no payments were made but interest was added to the mortgage. I know the monthly payments will be higher but as the mortgage will be repaid with the sale of the house in next few months would it be better start paying the higher payments from this month or have another month with no payments and pay it all of once the sale is through? 

davidmcn

Depends whether you need the cash or not. You'll pay less interest the earlier you restart repayments.

snowcat75

If you mean by paying off the mortgage your be mortgage free then another month here or there without payment will make the best part of naff all difference on your final redemption figure, however if your still mortgaged ie different product or transferred, paying as much as you can will make a fair difference.

Katitka1

Thank you snowcat75, We will be mortgage free, we are not getting another one. 

snowcat75

Katitka1 said:

Thank you snowcat75, We will be mortgage free, we are not getting another one. 

I'm in the same position, and took the mortgage holiday on our old property (empty), Actually with me the mortgage was still fixed for a couple of months, payment holiday and selling now has improved my redemption figure a fair bit!

eddddy

Katitka1 said:

I'm not sure about if another month of payment holiday will making any difference in saving money or it doesn't really matter. 

If you have the money to pay your mortgage, a payment holiday will not save you any money. It does the opposite - it costs you more money.

You have to pay extra mortgage interest as a result of a payment holiday. If you have the money sitting in a bank account (earning low/no interest), you're better off paying your mortgage.

The only time a payment holiday makes financial sense is if you don't have the money to pay your mortgage and/or you would have to borrow the money to pay your mortgage, for example from a bank loan, overdraft, credit card.



Edit to add...
And your mortgage lender will obviously have a record that you have had financial difficulties, and they might take this into account when making future decisions about lending to you.

AdrianC

You're going to be in exactly the same position post-completion when it comes to the total amount you've repaid from the mortgage, so you'll walk away with the same equity.

Let's say you owe £100k still, and are paying £500 of capital back per month. In three months, you'll either owe £98500 and have paid £1500, or you'll still owe £100,000.

The only difference is that in the "holiday" situation, you'll be paying interest on that £1500.

Katitka1

AdrianC said:

You're going to be in exactly the same position post-completion when it comes to the total amount you've repaid from the mortgage, so you'll walk away with the same equity.

Let's say you owe £100k still, and are paying £500 of capital back per month. In three months, you'll either owe £98500 and have paid £1500, or you'll still owe £100,000.

The only difference is that in the "holiday" situation, you'll be paying interest on that £1500.

Thank you, That's what I thought but I wasnt 100% sure.

RelievedSheff

Mortgage payment holidays should only ever be used as a last resort when you absolutely can not pay your mortgage. 

They are not a holiday and you are still accruing interest on the balance so will pay more in the long run.