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Thread: Mortgage holiday query

  1. #1
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    Mortgage holiday query

    Funds could be tight for the next few months so I am considering the 3 month holiday on offer to give us a buffer. If it turns out our income isnít too badly effected and I am able to make a capital lump sum payment equal to the 3 months missed payments in July/August, would I pay more or less over the whole term?

    It is a repayment mortgage and based on a daily interest calculation.

    Iíve asked my mortgage advisor and he vaguely said itís worth doing as a precaution and I should be back to the same position if I can pay the missed months when we are through this. To be honest Iím not sure he totally understands how compound interest and capital payments work (I know I donít).

  2. #2
    This compound interest calculator is able to do monthly options so it should be able to compute your situation.

    https://www.thecalculatorsite.com/fi...calculator.php

    Alot of people are in this situation - i was going to pay off a big credit card bill this month but for the sake of a few quid in interest i'd rather keep the cash for the next few months as a safety measure.

  3. #3
    I think the answer is ďit dependsĒ. I believe it varies from lender to lender.

    We have taken a holiday (weíre with Santander) and with them we attract interest for the 3 missed months. Term length remains unchanged but our repayment will increase slightly after the months off. This could be counteracted by making some overpayments later on.

    However the finance company I use for my Maserati are offering a 3 month holiday where all they do is stick another 3 months onto the end of the agreement.

    Not sure if thatís massively helpful but the small print should be available from whoever you have your mortgage with.

  4. #4
    Quote Originally Posted by jimyu View Post
    Iíve asked my mortgage advisor and he vaguely said itís worth doing as a precaution and I should be back to the same position if I can pay the missed months when we are through this. To be honest Iím not sure he totally understands how compound interest and capital payments work (I know I donít).
    Mortgage advisers, no surprise!

  5. #5
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    We have taken one with Santander which was sorted online in about five days. Diverted the money to get ahead on school fees.

    Things could be tight for a few months and the cost involved is minimal and you always over pay later when things get back on track.

  6. #6
    Master Maysie's Avatar
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    Ask your lender, as it will vary to suit the terms of your mortgage.

    My old mortgage allowed overpayments of 10% over the term.

    My current deal has penalties if I overpay. I am not sure if that rule has been softened to suit the mortgage payment holiday, but I doubt it.

    I had my payment holiday approved a couple of weeks back, as I would rather be safe than sorry. Anything else I can sort out later.

  7. #7
    Grand Master JasonM's Avatar
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    Quote Originally Posted by Maysie View Post
    Ask your lender, as it will vary to suit the terms of your mortgage.

    My old mortgage allowed overpayments of 10% over the term.

    My current deal has penalties if I overpay. I am not sure if that rule has been softened to suit the mortgage payment holiday, but I doubt it.

    I had my payment holiday approved a couple of weeks back, as I would rather be safe than sorry. Anything else I can sort out later.



    Us too, that was my view as well.
    Cheers..
    Jase

  8. #8
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    We did ours last week. If the option is there it seams daft not to take it. A good opportunity to add a bit more to your savings for the sake of a bit of interest.

  9. #9
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    Quote Originally Posted by gavsw20 View Post
    We did ours last week. If the option is there it seams daft not to take it. A good opportunity to add a bit more to your savings for the sake of a bit of interest.
    Can you get a higher interest rate for savings than charged on your mortgage?

  10. #10
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    No criticisms or snipping, just a genuine interest:

    I've not been in the position financially to pay school fees or own a Maserati. But I have always had savings to cover any "Bad times". Is it that you haven't the savings to get through or is it that you are living on future (hopefully!!) earnings?

  11. #11
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    Quote Originally Posted by jimyu View Post
    Funds could be tight for the next few months so I am considering the 3 month holiday on offer to give us a buffer. If it turns out our income isnít too badly effected and I am able to make a capital lump sum payment equal to the 3 months missed payments in July/August, would I pay more or less over the whole term?

    It is a repayment mortgage and based on a daily interest calculation.

    Iíve asked my mortgage advisor and he vaguely said itís worth doing as a precaution and I should be back to the same position if I can pay the missed months when we are through this. To be honest Iím not sure he totally understands how compound interest and capital payments work (I know I donít).
    It would work out that you paid more over the term, but it would be so small as to be negligible. Unless you have a mortgage of millions...!!???

  12. #12

    Mortgage holiday query

    Quote Originally Posted by redmonaco View Post
    No criticisms or snipping, just a genuine interest:

    I've not been in the position financially to pay school fees or own a Maserati. But I have always had savings to cover any "Bad times". Is it that you haven't the savings to get through or is it that you are living on future (hopefully!!) earnings?
    Canít speak for anyone else obviously but Iím a shocker for living just up to (and maybe slightly beyond) my means.

    Always had the (arguably immature) attitude of ďyou canít take it with youĒ.

    As Iíve got older Iíve realised thatís probably a little shortsighted.

    And the Maserati is financed up to the eyeballs. I have (had!) a certain amount of monthly income that gives me the luxury of financing a few toys.

    The current situation has been a big wake up call for me personally. When the income taps get turned off you realise very quickly that your outgoings are a bit nuts.

    Hence why Iíve had to liquidate a few watches.

    Can you tell me more about these ďsavingsĒ you speak of? A somewhat alien concept to me.

    ;o)

    Last edited by jfb1977; 10th April 2020 at 11:14.

  13. #13
    Quote Originally Posted by gavsw20 View Post
    We did ours last week. If the option is there it seams daft not to take it. A good opportunity to add a bit more to your savings for the sake of a bit of interest.
    It depends on the bank as it's not always just interest. Some add the mortgage repayments you would have made during the holiday to your balance.

    So if you usually pay 1k per month and you have a nice round 100k mortgage balance at the time of starting the holiday, after 3 months you'll have a new balance of 103k plus interest. The repayment term doesn't extend and your monthly repayments are recalculated for the new higher amount.

    Edit: Disregard the above and read Devonian's post #24
    Last edited by hughtrimble; 14th April 2020 at 15:18.

  14. #14
    Craftsman
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    Also with Santander, as with a couple of posters above. I have not taken the option at this point. I know they say it will not impact on credit rating, but future applications will show that you have not paid it for 3 months...although it will not show as a 'missed payment'. I am due to re-mortgage in 5 months, so anything that would risk me getting a decent rate is not a good move for me right now!

    This was my concern about doing it. Just to counter some of the comments above saying it is daft not to. (Also, easy to spend the cash saved on frivolous items!)
    *You may still feel it is daft not too!

  15. #15
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    Mortgage holiday query

    Quote Originally Posted by jfb1977 View Post
    Canít speak for anyone else obviously but Iím a shocker for living just up to (and maybe slightly beyond) my means.

    Always had the (arguably immature) attitude of ďyou canít take it with youĒ.

    As Iíve got older Iíve realised thatís probably a little shortsighted.

    And the Maserati is financed up to the eyeballs. I have (had!) a certain amount of monthly income that gives me the luxury of financing a few toys.

    The current situation has been a big wake up call for me personally. When the income taps get turned off you realise very quickly that your outgoings are a bit nuts.

    Hence why Iíve had to liquidate a few watches.

    Can you tell me more about these ďsavingsĒ you speak of? A somewhat alien concept to me.

    ;o)

    Similar to my position and view. I keep around £15,000 in cash in an emergency fund bank account. Coincidentally I am considering a (used) Maserati and will take a car loan for it, but when the shit hits the fan you can just sell a couple of watches etc.
    Last edited by RustyBin5; 10th April 2020 at 12:09.

  16. #16
    Haven't taken the option either but it's only £2.38/month.

  17. #17
    Master Alansmithee's Avatar
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    So from figures released this morning - 1/9 went for a payment holiday...

  18. #18
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    Quote Originally Posted by RustyBin5 View Post
    Similar to my position and view. I keep around £15,000 in cash in an emergency fund bank account. Coincidentally I am considering a (used) Maserati and will take a car loan for it, but when the shit hits the fan you can just sell a couple of watches etc.
    Selling a couple of watches during a financial crisis is, frankly, ludicrous. Now is the time to buy from the mugs who are selling.

  19. #19
    Grand Master number2's Avatar
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    You're "all heart".
    "Once is happenstance. Twice is coincidence. The third time it's enemy action."

  20. #20
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    Quote Originally Posted by hughtrimble View Post
    It depends on the bank as it's not always just interest. Some add the mortgage repayments you would have made during the holiday to your balance.

    So if you usually pay 1k per month and you have a nice round 100k mortgage balance at the time of starting the holiday, after 3 months you'll have a new balance of 103k plus interest. The repayment term doesn't extend and your monthly repayments are recalculated for the new higher amount.
    Is this right?

    If you owe the lender £100,000 at a certain point of time and donít make repayments for three months surely the interest keeps accumulating but you donít owe them more capital??

  21. #21
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    Quote Originally Posted by hughtrimble View Post
    It depends on the bank as it's not always just interest. Some add the mortgage repayments you would have made during the holiday to your balance.

    So if you usually pay 1k per month and you have a nice round 100k mortgage balance at the time of starting the holiday, after 3 months you'll have a new balance of 103k plus interest. The repayment term doesn't extend and your monthly repayments are recalculated for the new higher amount.
    Quote Originally Posted by FazerBoy View Post
    Is this right?

    If you owe the lender £100,000 at a certain point of time and donít make repayments for three months surely the interest keeps accumulating but you donít owe them more capital??
    No itís not right. Not close. Iíll try and work out an example for people if it helps.

  22. #22
    Quote Originally Posted by hughtrimble View Post
    It depends on the bank as it's not always just interest. Some add the mortgage repayments you would have made during the holiday to your balance.

    So if you usually pay 1k per month and you have a nice round 100k mortgage balance at the time of starting the holiday, after 3 months you'll have a new balance of 103k plus interest. The repayment term doesn't extend and your monthly repayments are recalculated for the new higher amount.
    Quote Originally Posted by FazerBoy View Post
    Is this right?

    If you owe the lender £100,000 at a certain point of time and don’t make repayments for three months surely the interest keeps accumulating but you don’t owe them more capital??
    Quote Originally Posted by Devonian View Post
    No it’s not right. Not close. I’ll try and work out an example for people if it helps.
    It would definitely help as I can't see what I've interpreted from this is wrong?

    https://www.halifax.co.uk/mortgages/...ment-holidays/
    If you take a mortgage payment holiday, this means that you wouldn’t make mortgage payments for up to three months and we’ll add these payments onto your mortgage balance. As a result, your mortgage balance will increase and your monthly payment will be recalculated over your remaining mortgage term. Your monthly payment and the amount of interest you pay will increase for the remaining term of your mortgage.

  23. #23
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    There's loads of mortgage holiday calculators out there..

    Here's one:

    https://onlinemortgageadvisor.co.uk/...ay-calculator/

    Ball park £10 a month more if you have £200k outstanding and 20 years left to go.

    Sent from my EVR-L29 using Tapatalk

  24. #24
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    Okay letís say you owe 100k on your mortgage and the rate is 2.4% for ease and your term is 15 years.

    Thatís around £668 pm. All things being equal £200 of that is interest and the rest is what your are paying off. So £668 - £200 = £468.

    Trying to keep this simple. If you take a payment holiday and the interest is compound in theory you will have approximately £200 added after the first monthly. With daily interest it could work out slightly higher but for simplicity letís call it £200. After that month you now owe £100,200. You are then paying interest on that £200 extra but it is minimal. After 3 months you would owe just over £10,600. Probably an extra quid or two.

    Say itís £600 again for simplicity, that an extra £1.20 in interest a month so minimal. Will probably add around £4pm based on the above 15 years.

    Might be worth just trying to cover the interest if possible so the actual debt doesnít increase.

  25. #25
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    Quote Originally Posted by hughtrimble View Post
    It would definitely help as I can't see what I've interpreted from this is wrong?

    https://www.halifax.co.uk/mortgages/...ment-holidays/
    Hi Hugh

    Itís only the interest thatís increasing, not the entire monthly payments. So if your normal payment is 1,000 and 200 of that is interest, itís the 200 thatís going up. The 800 isnít reducing the balance anymore.

  26. #26
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    Quote Originally Posted by Alansmithee View Post
    So from figures released this morning - 1/9 went for a payment holiday...
    Thatís surprisingly low, I would have expected more like 50%

    Thanks all for all the info itís very helpful

  27. #27
    Master Alansmithee's Avatar
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    Quote Originally Posted by jimyu View Post
    Thatís surprisingly low, I would have expected more like 50%

    Thanks all for all the info itís very helpful

    Why as high as 50%?

  28. #28
    Quote Originally Posted by Devonian View Post
    Okay letís say you owe 100k on your mortgage and the rate is 2.4% for ease and your term is 15 years.

    Thatís around £668 pm. All things being equal £200 of that is interest and the rest is what your are paying off. So £668 - £200 = £468.

    Trying to keep this simple. If you take a payment holiday and the interest is compound in theory you will have approximately £200 added after the first monthly. With daily interest it could work out slightly higher but for simplicity letís call it £200. After that month you now owe £100,200. You are then paying interest on that £200 extra but it is minimal. After 3 months you would owe just over £10,600. Probably an extra quid or two.

    Say itís £600 again for simplicity, that an extra £1.20 in interest a month so minimal. Will probably add around £4pm based on the above 15 years.

    Might be worth just trying to cover the interest if possible so the actual debt doesnít increase.
    Quote Originally Posted by Devonian View Post
    Hi Hugh

    Itís only the interest thatís increasing, not the entire monthly payments. So if your normal payment is 1,000 and 200 of that is interest, itís the 200 thatís going up. The 800 isnít reducing the balance anymore.
    Oh I see, my bad. Thank you for the education!

  29. #29
    Quote Originally Posted by Devonian View Post
    Okay letís say you owe 100k on your mortgage and the rate is 2.4% for ease and your term is 15 years.

    Thatís around £668 pm. All things being equal £200 of that is interest and the rest is what your are paying off. So £668 - £200 = £468.

    Trying to keep this simple. If you take a payment holiday and the interest is compound in theory you will have approximately £200 added after the first monthly. With daily interest it could work out slightly higher but for simplicity letís call it £200. After that month you now owe £100,200. You are then paying interest on that £200 extra but it is minimal. After 3 months you would owe just over £10,600. Probably an extra quid or two.

    Say itís £600 again for simplicity, that an extra £1.20 in interest a month so minimal. Will probably add around £4pm based on the above 15 years.

    Might be worth just trying to cover the interest if possible so the actual debt doesnít increase.
    But assuming your term doesn't extend by 3 months, then you also have to add the 3x 468 capital payments you missed which is an extra £5.85 a month over the remaining 20 years, so after the holiday, your monthly payment would increase by £5.85 plus the £1.20 interest, no?

  30. #30
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    Quote Originally Posted by Brighty View Post
    But assuming your term doesn't extend by 3 months, then you also have to add the 3x 468 capital payments you missed which is an extra £5.85 a month over the remaining 20 years, so after the holiday, your monthly payment would increase by £5.85 plus the £1.20 interest, no?
    It was 15 years (not 20), so £7.80 I guess.

  31. #31
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    Yes thatís right.

    Hopefully future mortgage deals will be more competitive than the existing deals most are on now and any savings could be used to Ďcatch upí so to speak.

  32. #32
    Master Alansmithee's Avatar
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    Quote Originally Posted by Devonian View Post
    Yes that’s right.

    Hopefully future mortgage deals will be more competitive than the existing deals most are on now and any savings could be used to ‘catch up’ so to speak.
    If you can access them - saw this in the Guardian yesterday:

    Need to know The government, the FCA and lenders have all stated that taking a payment holiday will not affect an individual’s credit rating.

    But remember that while the UK’s credit reference agencies hold the data that makes up someone’s credit score, these bodies do not decide whether someone can obtain credit – that is up to individual lenders, who are free to choose to whom they wish to lend. If you are expecting to apply for any kind of credit in the next couple of years, the fact you took a break may limit your options.
    Need to know Mortgage holders on payment holidays can switch to a new deal offered by their existing lender at the end of their term, but it’s not so simple when it comes to remortgaging to another lender.

    Chris Sykes, a consultant at the mortgage broker Private Finance, says if you require new finance in the next six months – a remortgage with a new lender, say – a payment holiday will make your application less likely to be accepted.

    He told Money that while some lenders are becoming more flexible, “others who are more reserved in terms of what they lend … would look unfavourably on you having a payment holiday”.
    https://www.theguardian.com/money/20...ts-coronavirus

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