Am I a genius or is this a stupid idea? payment holiday to avoid SVR and move house

HCIMbtw

I've sold my house and am currently trying to find somewhere to buy, so will likely complete in 8-12 weeks or so
My mortgage product is up 30th September at which point I revert to SVR and will be paying circa £450pm more in interest payments... obviously would like to avoid those extra interest repayments
My wife has been furloughed for a couple of days a week, household income has been impacted (albeit not greatly at all) 
The bank my mortgage is with will allow payment holiday applications up until October 30th if you self certify that household income has been affected, which it has
The payment holiday will give me time to complete a purchase somewhere else and sort out a new product for that purchase

Aside from the slight potential impact on credit rating (which I am not concerned about) am I overlooking anything, would the accrued interest from the holiday period be payable on ending my mortgage product during the payment holiday (e.g. that £450 I think I have avoided just comes back to me any)? so there is actually no benefit to me taking a holiday at all.. 

The other option I have come across is switching my mortgage to First Direct variable, with zero ERC's from 30th September, this would require a lot of paper work but sets me up with a better rate mortgage than the SVR I am looking at and appears to give me the flexibility to get out easy

davidmcn

HCIMbtw said:

would the accrued interest from the holiday period be payable on ending my mortgage product during the payment holiday (e.g. that £450 I think I have avoided just comes back to me any)? so there is actually no benefit to me taking a holiday at all.. 

Correct, it's just a deferral, so you'll end up paying even more interest than you would otherwise. Only worthwhile doing it if you're actually having a trouble with cashflow.

As for switching to another product, bear in mind lenders tend to ask whether your property is on the market - they won't want to go through the admin on their side if you're only going to have the mortgage for a matter of weeks.

Slithery

HCIMbtw said:
would the accrued interest from the holiday period be payable on ending my mortgage product during the payment holiday (e.g. that £450 I think I have avoided just comes back to me any)? so there is actually no benefit to me taking a holiday at all.. 

Correct.

HCIMbtw

Slithery said:

HCIMbtw said:
would the accrued interest from the holiday period be payable on ending my mortgage product during the payment holiday (e.g. that £450 I think I have avoided just comes back to me any)? so there is actually no benefit to me taking a holiday at all.. 

Correct.

Useful thanks...
Suppose i could postpone a month at a time beforejbefore september 30th to accrue interest i have to pay off at 1.7% rather than 4.5%.. would still save me like £400 or so per month, would just have to do it while i am still on fixed rate rather than once i aveh reverted to SVR... and then try to time coming finishing my mortgage product in time with my actual moving date..

MovingForwards

Aside from a few members have posted that they've had mortgage holidays and it hasn't gone down well with the new proposed lender.

tom9980

There are cases where lenders are ignoring portions of income where someone has been on furlough under the assumption they are likely to become unemployed sooner rather than later. Adding into the mix a mortgage holiday would be extremely unwise. It may be a good idea to seek the advice of a broker now.

D.L

HCIMbtw said:

Useful thanks...
Suppose i could postpone a month at a time beforejbefore september 30th to accrue interest i have to pay off at 1.7% rather than 4.5%.. would still save me like £400 or so per month, would just have to do it while i am still on fixed rate rather than once i aveh reverted to SVR... and then try to time coming finishing my mortgage product in time with my actual moving date..

I'm not sure you fully understand what the mortgage holiday is. Your debt is still increasing at the same rate, you just don't need to pay anything during the holiday. The amount you owe goes up and you will end up paying more as the monthly mortgage payment you would have paid will also accrue interest for the rest of your mortgage (although this will only be a few months given you intend to repay soon). The benefit is in terms of cash flow. You have more money freely available to you. Maybe this is an important factor for you as there are lots of one-off costs with moving.

You say you are not concerned with the impact on your credit rating but you are looking to apply for a new mortgage. By taking a payment holiday you are effectively saying "I cannot afford to pay you right now on the agreed terms". A lender will certainly take this into account so soon after it happens.

HCIMbtw

D.L said:

HCIMbtw said:

Useful thanks...
Suppose i could postpone a month at a time beforejbefore september 30th to accrue interest i have to pay off at 1.7% rather than 4.5%.. would still save me like £400 or so per month, would just have to do it while i am still on fixed rate rather than once i aveh reverted to SVR... and then try to time coming finishing my mortgage product in time with my actual moving date..

I'm not sure you fully understand what the mortgage holiday is. Your debt is still increasing at the same rate, you just don't need to pay anything during the holiday. The amount you owe goes up and you will end up paying more as the monthly mortgage payment you would have paid will also accrue interest for the rest of your mortgage (although this will only be a few months given you intend to repay soon). The benefit is in terms of cash flow. You have more money freely available to you. Maybe this is an important factor for you as there are lots of one-off costs with moving.

You say you are not concerned with the impact on your credit rating but you are looking to apply for a new mortgage. By taking a payment holiday you are effectively saying "I cannot afford to pay you right now on the agreed terms". A lender will certainly take this into account so soon after it happens.

I feel i understand it v well.. i am just trying to work out if i can exploit the fact a mortgage holiday is available for a period of about 2 months to postpone going onto my SVR for 2 months to save on extra fees

Because if i time it right my fixed rate product will have ended, i wont have any ERCs and i wont wont to pay the interest with the lender for the duration of the mortgage

The downside as slithery points out is that if i do take the holiday i would be liable for paying the interest i accrue during the holiday when i end the mortgage (not in 20 years, like in 3-4 months from now)

So there is no point in taking the holiday when i am on SVR paying 4.49% as the interest will accrue at that rate and i will have to pay it.. however there might be value in a holiday for two months if it essentially extended my 1.7% fixed rate mortgage for 2 months.. maybe it doesnt do that though, i would probably need to speak to somebody at the bank...

All this is just making me think it is for the best to switch to the First Direct variable rate with no ERCs though.. should be able to do that for the short term, if i get a prospective moving date and i am only paying like 1 months SVR i i will just suck the extra interest payments

[Deleted User]

Oh my you have no idea OP
A mortgage HOLIDAY is not sunning oneself on a beach whilst the nice building society pay the mortgage for you.
its just deferring paying whilst the debt AND interest at the current applicable rate keeps on mounting up.
it will affect your credit score
you wont avoid the standard rate 
it may cause you to be refused a mortgage

davidmcn

HCIMbtw said:

however there might be value in a holiday for two months if it essentially extended my 1.7% fixed rate mortgage for 2 months..

How would it do that? Your fixed rate ends on the date it's meant to, and you're then onto the SVR (whether or not you're actually making payments towards it).

haras_n0sirrah

A client of mine had an aip in feb to port a nationwide mortgage. Lockdown happened and unbeknownst to me they took the payment holiday despite income not being affected (they cleared credit cards with it) find a property in june and lender declined the port due to the payment holiday and 'they didn't feel it was right to increase the burden at this difficult time' -- put in an appeal as client never been in a better position due to having cleared debt and mrs worked in a supermarket so getting a lot of overtime. Appeal declined as they shouldn't have taken the holiday unless unable to pay the mortgage. Got them a mortgage with Halifax but they have a 7k erc to pay. Dont take the holiday unless you need it