Christina Jordan of Your Mortgage magazine explains how to take a break from our mortgage repayments.
Imagine receiving a letter from your mortgage company telling you not to bother paying your instalment this month if you are a bit short. It seems fantastic but not very likely.
However, if you had a flexible mortgage you might be able to skip a month without even telling your lender. This is because flexible mortgages allow you to take more control over how you repay your home loan.
Flexible mortgages have been in the UK for about ten years, but have become hugely popular in recent years. Most major mortgage lenders offer flexibility in their mortgage range. So what exactly is a flexible mortgage and, more importantly, how can it allow you to take a break from your repayments?
Back to basics
A flexible mortgage is not as restrictive as a traditional home loan. It includes features that allow you to control your own finances. For example, if you have extra money one month you can overpay on your mortgage; that is pay more than your agreed repayments.
By doing this you will reduce your balance and, therefore, the interest you are charged on your debt. Over the term of your mortgage the savings made by overpaying can add up to thousands of pounds. And when you overpay you create a buffer that can be invaluable if you ever need a break from your repayments.
A payment holiday is where you don’t pay your mortgage for a period. This can be for one month or six months, depending on your finances and the criteria of your lender.
Most lenders will only allow you to take a payment holiday when you have already made overpayments. So, for example, if you intend to skip two months of payments and that amounts to £1,200, you must have overpaid more than £1,200 before you do.
All of Halifax’s mortgages offer flexible features, and borrowers are able to take payment holidays if they meet certain criteria. Spokesperson Paul Fincham explains, ‘Borrowers need to have had their mortgage for six months before they take a payment holiday, and they must have overpaid to the amount they intend to miss. This ensures that they remain on track to pay off their mortgage within the term.’
Benefits
A payment holiday could help you out in many situations. For example, if your finances are stretched after Christmas, you could skip a month on your mortgage repayments in order to pay off credit card bills.
Or perhaps you want to start a family and would appreciate a gap in repayments during the first months after the child is born. Or maybe you want to go travelling the world and you simply don’t want to pay your mortgage while you are away.
Whatever the reason, a payment holiday can be a welcome break from your monthly payments. It’s your mortgage, so why not take more control over how you repay it?