6 Month Mortgage Break

N6xxy

Hi all,

A friend of mine has decided to take the 6 month break offered below: She's very happy "because it won't go against her credit score or have any adverse affects". Surely taking any payment break from a loan is never truly affect free? Her payments will go up slightly after the break but there must be more to it? loads more interest? Banks seeing that you took a break and decide you're a risk?

Thank you for any input

• A new deal between lenders, the FCA and the government permitting customers who are up to date with their payments to:

  • Switch to interest-only payments for six months or
  • extend their mortgage term to reduce their monthly payments and give customers the option to revert to their original term within 6 months by contacting their lender

These options can be taken by customers who are up to date with their payments without a new affordability check or affecting their credit score[5]. Customers who are currently in arrears should continue to work with their lender for the support that they need.

amnblog

The Government have said it will not affect your credit score - so it must be true.

Worth doing if you have a definite need to do so. No benefit if you do not need it.

N6xxy

Thank you, does interest add to the remaining term of the loan and there end up paying back a substantial amount more?

la531983

N6xxy said:

Thank you, does interest add to the remaining term of the loan and there end up paying back a substantial amount more?

Yes, essentially interest will be building up for the next 6 months with no payments to offset it (or any of the original capital)

N6xxy

Thank you for your response

MWT

If they are taking the interest only option then no, the interest does not build up as that is still being paid.

What happens is the capital component does not get paid so the outstanding capital does not go down at all during that period.

The consequence is that at the end of the 6 months when it returns to a normal repayment mortgage, the repayments each month will be higher as that unpaid capital has to be recovered over the remaining term of the mortgage.

The lender should be able to tell them what the new repayment will be.

 

JMA74

It not impacting the credit score is not the same as it not impacting a future lenders credit policy 

For example, the mortgage holidays during covid did not impact credit score. However if you tried to take a new mortgage out at that time you would have been asked if you took a mortgage holiday and would easily have been declined 

SoundsFair

JMA74 said:

It not impacting the credit score is not the same as it not impacting a future lenders credit policy 

This is my concern. I'm thinking about taking the 6 month interest only break, but I don't really need to. I'd only be doing it to maintain disposable income for a period whilst I hope rates might fall, but this isn't probably a good reason to go for the break. 

It would be cheeky for lenders to ask applicants whether they've used this mortgage help and use that as a screening measure for applications when it's not supposed to affect your credit score. A bit backhanded!

TheAble

SoundsFair said:

JMA74 said:

It not impacting the credit score is not the same as it not impacting a future lenders credit policy 

This is my concern. I'm thinking about taking the 6 month interest only break, but I don't really need to. I'd only be doing it to maintain disposable income for a period whilst I hope rates might fall, but this isn't probably a good reason to go for the break. 

It would be cheeky for lenders to ask applicants whether they've used this mortgage help and use that as a screening measure for applications when it's not supposed to affect your credit score. A bit backhanded!

You only get to use the option once I think? Probably better saved until such time as you may genuinely need it.