Mortgage payment holidays

A mortgage payment holiday is an agreement with your lender that means you can pause or reduce your mortgage payments for an agreed time.

But it’s designed as temporary support, not a long-term solution.

Typically, you’ll be able to stop or pay less for up to 12 months, but this will depend on your lender.

It’s also worth stressing that interest usually continues to build up during this time.

And missed payments aren’t written off - they’re just added back later.

Lenders will take a case-by-case look at anyone who asks for a mortgage payment holiday and take a close look at factors like:

• your current income and outgoings
• how long you’ve had your mortgage
• whether you’ve taken a payment holiday before
• the terms and conditions of your mortgage

You may be more likely to qualify if you have a good track record of keeping up with your mortgage payments.

Lenders may also look sympathetically at you if you can show a temporary change in circumstances, such as: 

• redundancy
• reduced working hours
• maternity or adoption leave
• illness or caring responsibilities

If you’re already in mortgage arrears, you may not qualify for a formal payment holiday.

In that case, you should still speak to your lender as soon as you can and explain your situation openly and honestly.

They’ll look at ways of reducing your monthly payments, such as switching to interest-only or extending your mortgage term.

It could also be worth speaking to a debt adviser if you’re behind on payments or worried about falling into arrears.

During a mortgage payment holiday, you’ll stop paying all or part of your mortgage for an agreed period.

Interest is still added to your mortgage balance during this time, so your total mortgage debt increases.

And when the payment holiday ends, your lender may: 

• increase your monthly mortgage payments
• extend the length of your mortgage term
• ask you to make partial or interest-only payments for a while

This means your mortgage may cost more overall and monthly payments could be higher when you restart.

A mortgage payment holiday can affect your credit rating.

And that can make it harder to: 

• remortgage your home
• borrow money in future
• pass affordability checks

So before agreeing to anything, ask your lender how the payment holiday will be recorded and if it could affect borrowing further down the line.

A mortgage holiday might be an option if you’re facing short-term difficulties, as it:

• gives you breathing space when money is tight
• helps you prioritise essential bills
• can prevent missed payments and arrears
• gives you time to review your budget and finances

But there are also downsides to think about.

For example:

• your mortgage balance increases
• you’ll usually pay more interest overall
• monthly payments may go up afterwards
• your credit record may be affected

So it might not be the best mechanism if you’re dealing with long-term financial problems, such as debt.