Thứ Hai, 1 tháng 6, 2020

Should I apply for a mortgage holiday? Martin Lewis says it could affect your borrowing in the future

Last week it was announced that mortgage holidays were due to be extended for a further three months. This might sound like good news but Martin Lewis warns that  you need to think very carefully about the question: ‘should I apply for a mortgage holiday?’

Related: Martin Lewis says this is why he wouldn’t be buying a house right now

Millions of people have already  applied for mortgage holidays to help them through this tough financial time. However, when the new extension is approved you will have up to the 31st October to apply for an extension.

However, appearing on This Morning, our favourite money saving expert dashed our (and Phil’s) naive hopes that a mortgage holiday was a straight forward good idea. ‘So good news that the mortgage holiday’s been extended?’ asked Phil.

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Image credit: Errol Griffith/EMPICS Entertainment / PA

‘Well almost extended,’ explained Martin. ‘We’ve had the proposals from the regulator. We’re waiting to hear whether it’s been rubber stamped – today or tomorrow.’

Which is good news for those people that are going “Oh, I don’t really need one now but I’m worried about my finances going forward, and are feeling pressurised to take one now in case they feel the need to take the opportunity. Well you don’t need to do that. You’ve got until the 31st October.’

For those who’ve already had a mortgage holiday and feel they need another one, well you can get another three months. That’s the other extension that comes forward. So you can speak to your mortgage lender, and if your finances are affected by Coronavirus you can apply for another mortgage holiday.’

Should I take a mortgage holiday?

‘Now I need to be really plain here,’ warns Martin. ‘This is something you should do if you need it it and you should not do if you don’t need it. This is not something just to take willy nilly.’

‘Here’s why you need to be careful.’

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Image credit: Jonathan Jones

‘First of all, this is a mortgage payment holiday not an interest holiday. So you don’t pay the mortgage but the interest keeps growing while you are on this payment holiday.’

‘So to give you an example, if you had 20 years left on your mortgage and were paying £700 a month, and you took a six-month mortgage payment holiday – three months plus three months – then at the end, you’d have 19 years and six months to pay and it would cost you £725 a month, so each month your payments would go up by £25.’

‘But the less time you’ve got left and the higher the interest, that could see payments going up by £50, £75, £100 a month. That’s the first reason to be very careful, and think before you do it.’

‘The second is, while these won’t go on your credit file, mortgage companies will be looking to see if you have taken a payment holiday. They can’t do it from your credit file, but they can use things called open banking or your payment history.’

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Image credit: Ti-Media

‘They will be able to track if you’ve had a payment holiday and we don’t know quite the impact but it is likely to have at least a minor detrimental effect – in some cases – of you getting a mortgage or other credit in the future.’

Martin reveals that he broke this story three weeks ago. The regulator included it in the announcement after Martin and his team got it confirmed by them, because Martin had heard that this is what is going on.

Martin’s final verdict

‘If you need it, do it, because it is nowhere near as bad as missing mortgage payments,’ says Martin. ‘If you miss those, that will kill your credit score.’

Related: What expenses can I claim for working from home? Martin Lewis explains all…

‘But if you don’t need it, don’t do it. That’s the simple rule. Only take a mortgage holiday if you need one.’

The post Should I apply for a mortgage holiday? Martin Lewis says it could affect your borrowing in the future appeared first on Ideal Home.


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