Due to the coronavirus pandemic, mortgage lenders have expanded access to mortgage payment holidays for customers experiencing financial difficulty. Lenders aren’t automatically granting payment breaks, but individuals have the right to request a payment holiday if their finances have been adversely affected.
So what exactly is a mortgage payment holiday, and what does it mean in practice?
A mortgage payment holiday offers a temporary break in repayments. It delays or prevents debt collection procedures or repossessions by the lender, and offers a valuable financial ‘breathing space.’
Mortgage holidays typically last for three months, but some people may be eligible for a further three-month payment break. During this time you don’t make any repayments but interest continues to accrue on the loan, and the missed payments must be made up at some point in the future.
If you’re struggling to repay your mortgage whilst you’re in a Trust Deed or the Debt Arrangement Scheme, it’s vital that you inform the trustee as soon as possible. Essentially, they need to be aware that your financial situation has worsened.
If your mortgage provider is unable or unwilling to offer a mortgage payment holiday because you’re in a formal debt procedure, you may be able to change the payments on your trust deed or debt payment plan.
Trust deeds and debt payment plans have flexibility built in that recognises that financial circumstances can change over time. These formal debt procedures typically last for several years, and it’s not unusual for people to suffer job loss or pay cuts during this time.
It’s vital to speak to your trustee or DAS administrator as soon as you feel you’re struggling to pay your mortgage. They can advise on a mortgage holiday, and may also be able to temporarily alter the terms of your debt procedure to reflect the new financial situation.
Bear in mind that if you’re successful in obtaining a payment holiday from your mortgage provider, the mortgage payments you miss must be paid at some point, whether they’re spread over the ensuing months or added to the end of your mortgage term.
Additionally, although your credit rating isn’t officially affected by taking a payment break, some lenders may decide to take it into account if you apply for borrowing in the future.
If you would like more information on mortgage payment holidays when you’re in a trust deed or DAS, and guidance on the best way forward, please contact one of our licensed insolvency practitioners at Scotland Debt Solutions.
We’ll explain the best way to proceed, and provide the reliable professional advice you need under these challenging circumstances. We work from offices around Scotland, and can offer you a free same-day consultation.
The ban on commercial evictions in Scotland is in place until March 2022. We offer company debt help if you can't afford business rent or mortgage payments.
If you've been made redundant after furlough, understand your redundancy rights, how redundancy & notice pay is calculated and how to claim unfair dismissal.
Our Scottish based team can help advise you on your debt problems.