Struggling to pay your mortgage as a result of the pandemic – the good news is that the FCA (Financial Conduct Authority) has set new guidelines for all Lenders to allow you to take advantage of a payment holiday. This will mean that you will not need to make any payments for a set period of time. You may also take advantage of a partial payment holiday; this is where the Lender allows you to make part of the payment. The FCA expects all regulated mortgage lenders and administrators to comply with our guidance. There are companies which are unregulated and whilst they are not bound by the guidelines the FCA expects them to adopt this guidance on a voluntary basis.
If you take advantage of this scheme you will still owe the money that you have not paid during the payment holiday. Also, interest will still continue to be charged on the amount that you owe. At the end of the payment holiday you will be responsible for making up the missed payments for example by increasing the instalments or requesting a short extension to the loan. You should discuss all options with your lender.
How to apply
You should contact your lender if you are experiencing payment difficulties because of circumstances related to the coronavirus. Due to high levels of demand and staff now having to work from home, there may be a delay in getting a response if you attempt to call most lenders now allow you to apply on-line as a result.
What if you are paying via direct debits?
Do not cancel your direct debit without speaking to your lender first. If you cancel your direct debit, it is not a payment holiday and will be counted as a missed payment. This could show up on your credit file and could affect you if you wished to re-mortgage.
What happens to the interest on your mortgage during the payment holiday?
You will still be charged interest during the payment holiday, unless your lender tells you otherwise.
Agreeing the payment holiday
The FCA expects lenders to offer payment holidays to borrowers who are experiencing payment difficulties because of the coronavirus, unless they have another option that is better suited to your needs and in your best interest.
You should not apply for a mortgage payment holiday if you are not experiencing or do not reasonably expect to experience payment difficulties.
When should you apply?
If you are experiencing or reasonably expect to experience payment difficulties and may need a payment holiday, you should speak to your lender before your next payment is due.
You can apply for a payment holiday at any time before this process is to be reviewed in 3 months. The payment holiday will not start, until your Lender agrees.
What happens when the payment holiday ends?
The FCA have proposed further measures to support customers who are struggling to pay their mortgage due to coronavirus.
Does it affect your credit File
Normally if you miss a payment this will affect your credit rating, the FCA guidance makes clear to Lenders that they make sure that taking a payment holiday will not have a negative impact on your credit file.
What happens if you are at risk of being repossessed
During this current pandemic the FCA have stated that ‘we do not think people should be at risk of losing their homes. We therefore expect lenders to stop repossession action. This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus.’
What if you already have a possession order?
The FCA have made it clear that they would not expect the lender to go ahead with the repossession of your home, unless this is what you want. You should speak to your lender and seek independent legal advice urgently. You can choose to allow your home to be repossessed if you believe it’s in your best interest – for example, you’ve already made plans for somewhere to live. If this is the case, please let your lender know this.
The amount you owe will increase because interest will continue to be charged. This means that you are likely to get less back if and when your property is repossessed and then sold by your lender. If property prices go down between now and the time your property is sold then you might get even less back, or nothing if your property is sold for less than you owe.
So please all remember if you are financially struggling there is some help available and if you do not ask, or let your lender know that you are struggling financially you will not be able to take advantage of this and court action may be taken against you.
Make sure that you take advantage of the free help and support available and remember the most important thing for you to be aware of is you are not alone.
Agencies that can assist you