A guide to mortgage payment holidays

Money Advice Service

With some mortgages you can apply for a ‘mortgage payment holiday’ if money is tight. Find out how mortgage payment holidays work, the circumstances in which you might be granted one and the pros and cons of getting one.

What is a mortgage payment holiday?

A mortgage payment holiday is an agreement you might be able to make with your lender allowing you temporarily to stop or reduce your monthly mortgage repayments.

For example, depending on your circumstances and previous payment history, you might be able to take a break for usually up to six months:

Not all mortgages offer the option of a mortgage payment holiday – it depends on the product’s terms and conditions.

Eligibility for a mortgage payment holiday

Whether you are eligible to take a payment holiday, for how long, and the conditions you must meet first will depend on:

  • Your lender
  • The mortgage contract, and
  • Your financial circumstances

Often, in order to qualify for a payment holiday, you’ll need to have previously overpaid on your mortgage.

That means paying more than your agreed monthly payments until you have built up sufficient credit to take a break from payments.

However, your lender might also allow you to reduce or suspend mortgage payments if you’re temporarily struggling to meet the monthly cost due to a change of circumstance, such as redundancy or going on maternity leave.

If you’re in mortgage arrears you won’t be eligible for a mortgage payment holiday.

But don’t let that stop you contacting your lender. They will be keen to help you come to an arrangement.

Pros of a mortgage holiday

The biggest positive about a payment holiday is that it relieves some pressure for a while.

For a period of time, you have one less thing to worry about when considering your outgoings.

If you are only facing a temporary drop in income, perhaps because you or your partner are having a baby and the mortgage holiday is to cover the maternity leave period, this can be a sensible move.

Cons of a mortgage holiday

While a mortgage holiday can be a useful short-term solution, it is not suitable if you can’t afford your mortgage payments because your household income has reduced permanently.

There are several important things to bear in mind:

  • While you are not making mortgage payments, you’re still racking up interest on your remaining mortgage balance.
  • When the payment holiday comes to an end, your outstanding mortgage balance and mortgage payments will be higher than they were before the holiday.
  • Even if your lender agrees to this temporary solution, your credit file will be affected. This in turn could affect your ability to get credit in the future.

If you’re in arrears or struggling to pay your mortgage

Use our Budget planner to work out how much you have coming in and going out and see if there’s a way you can cut non-essential spending to help you meet your mortgage payments.

If you think you want to take a payment holiday because you’re struggling to meet your mortgage payments or in danger of falling into arrears, talk to your lender as soon as possible about an alternative solution.

Lenders would much rather come to an agreement that’ll allow you to continue paying your mortgage at a reduced rate.

If you’re not in arrears but are finding it hard to meet your repayments it could be worth your while shopping around for a cheaper mortgage deal.

Our guide Remortgaging to cut costs tells you how to do this and what to look out for before you do.

Debt advice

If you’re still worried, you can get free debt advice from organisations like Citizens Advice or StepChange Debt Charity.

Remember, taking a mortgage holiday is only suitable as a temporary measure – and where you have sufficient savings or equity (capital) in your property to prevent you falling into unmanageable levels of debt.

How to apply for a mortgage holiday

Check with your lender and have a look at your mortgage terms and conditions to see if you’re eligible for a mortgage holiday and if they are allowed under your mortgage agreement.

The criteria will vary from lender to lender:

  • The length of your payment holiday depends on the lender. Some will allow you take up to 12 consecutive months off from paying the mortgage, while others will permit only up to six months over the life time of the mortgage.
  • Typically, you will often have needed to have made payments on time for a minimum period before you’re eligible to take a mortgage holiday.
  • Your ability to take a mortgage holiday also depends on the size of your mortgage and the value of your home. Some lenders will only allow a mortgage holiday if the loan-to-value of your mortgage is lower than 80%.

This article is provided by the Money Advice Service.

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Key things to remember when using Rest Less Money:

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Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
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We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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