Need some respite
from your mortgage?

Tighter household finances look for a little payment relief

With the affects of the UK’s current economic climate taking a chunk out of many household finances we consider some different options to bring a little mortgage relief if your circumstances are getting somewhat challenging.

To try and bring some respite to the sector mortgage lenders were urged by the chancellor at a recent mortgage summit, to let homeowners that were facing repossession to take a break from their payments. This is an option already offered by some banks and building societies, with many schemes allowing you to take a payment holiday.

Check with your lender if they will allow you to take a payment holiday for a short time. Some mortgage lenders will even allow you to take a payment holiday for up to six months, even if you have not made any overpayments previously. The money you do not pay is added to your overall loan, so you will eventually end up paying more.

Some lenders will only allow you to take a payment holiday if you’ve previously overpaid. To overpay you will have typically needed to set up an account with a limit when you first agreed the mortgage, with subsequent payment holidays being deducted from the account.

If you have an offset mortgage, find out if your lender will permit you to reduce your current monthly outgoings. Offset mortgages work by setting your savings against your borrowings. The money, in effect, cuts the size of your overall mortgage, so you pay less interest. Although most lenders still require that you pay the same monthly rate, and so in effect overpay, there are some that may allow you to reduce your payments.

The majority of lenders will also allow you to pay just the interest on a mortgage rather than the capital so reducing your monthly repayments, although this may become more difficult because of the credit crunch.

You could consider extending the term of your mortgage which may also reduce the monthly cost. However, if you decide on this option to make the mortgage repayments more affordable, make sure this is a temporary measure and reduce it or make overpayments as and when you can afford to do so.

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