Mortgage payment schemes are not as rigid as they might first seem. While they are some of the biggest financial commitments that we can face, it is important that we are able to make those payments each month. Many might now be thinking about taking a mortgage holiday. Let’s take a closer look at what you need to know about this option.
What is a Mortgage Holiday?
The ongoing COVID-19 pandemic has affected many people in various ways. Many have found themselves being furloughed, and some have seen their existing work pool vanish. This can leave them struggling to cover mortgage payments on top of their other financial commitments.
As a result, the government has recommended to lenders that they allow their borrowers to take some form of mortgage holiday. This is a relief in the form of either stopping payments or reducing them for up to three months.
It’s Not “Free Money”
When you opt to freeze or reduce your payments, this is not going to have an overall impact on the amount you still owe. All this scheme allows you to do is change the rate at which you pay. You are not writing off any part of the mortgage in any way. However, low-interest rates mean that you should see too much of an increase in your monthly payments when the holiday is over.
Your Credit Score is Unaffected
A big concern for many with mortgage holidays is how their credit scores might be affected. However, many of the big credit reference agencies such as Experian have agreed to freeze current scores. Whatever your current credit score might be, it will be frozen at its current level for as long as your mortgage holiday shall last.
You Might Not Need the Holiday
Some people have panicked and applied for a mortgage holiday when they might not yet need it. Though incomes have fallen in many areas, there are those who might not yet need the holiday. If you are still able to make your payments, it is advised that you do so. This means that it is still an option open to you later down the line.
There are Other Options
Mortgage holidays are not the only option available to those who might be struggling to make their current payments. As a result, it might be better for you to look into some of the other options available to you instead of just immediately opting for the holiday.
You could talk to your lender about switching your rate. If you are paying more than you can currently manage, your lender might let you change your deal to one with reduced payments. You could also ask about switching to an interest-only mortgage for a short time period, as this could also help reduce monthly payments.
If you are worried about how you could make your mortgage payments, or you want to know whether a mortgage holiday could be right for you, don’t hesitate to get in touch with GPD Mortgage Solutions today. We will be able to offer you expert advice that will help you decide the right path to take with your mortgage.