We have had a lot of customers phoning up with questions relating to the Government’s recommendation for lenders to offer a 3 month mortgage payment holiday for people who will struggle to meet their monthly commitment as a result of the Covid-19 outbreak.
I have reached out to a few of our typical lenders to get clarification on the situation and the policies they have put in place over the weekend.
What are the circumstances and policies on agreeing to a payment holiday?
If you can show genuine difficulties in being able to afford your monthly mortgage payments and the lender understands the reasons why this is, then you are encouraged to get in contact with the lender as soon as possible to ascertain the best way forward. The lender will explore other potential resources you may have available to pay the mortgage before they will look into granting a payment holiday.
Will there be a charge to take out a payment holiday?
There shouldn’t be any charge for taking out a payment holiday following the Government’s guidelines however, this will be at the discretion of the specific lender so you will need to seek further clarification to confirm this.
How will this affect future payments?
Lenders will roll up the missed payments and add them onto the existing total gross loan amount. After the payment holiday period is up, the payments will then be recalculated going forward. Taking out a payment holiday will not be interest free, therefore interest will be incurred.
How will this affect my credit file?
Taking out a payment holiday due to the Covid-19 outbreak should not affect your credit file however when we reached out to some of our lenders and asked how the payment holiday would be recorded on a credit file they came back and said it will either be shown as a ‘0’ meaning the payment has been made, or a ‘U’ meaning unclassified. If your mortgage is not in arrears, the mortgage payment holiday will not impact your credit rating and you will not go into arrears on your mortgage. When seeking to take out future finance it may be a case that the lender would need clarification as to why you have a certain code present on your report.
Lenders are continuing to keep their websites updated as and when developments arise however, if you have any specific concerns, please feel free to get in touch.
Please refer to the below links from a few of our main lenders for more information.
https://www.kentrelianceforintermediaries.co.uk/faqs (when clicking on this link please select ‘Coronovirus’ from the drop down menu)
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