Will taking a mortgage break affect my credit score?

Will taking a mortgage payment holiday affect my credit score?

Last month, Chancellor Rishi Sunak announced that if you’re facing financial difficulties due to coronavirus, you will have the option to take a three-month mortgage payment holiday. But what does this actually mean for you and your credit score? To help de-Baffle this new policy, here’s a quick run through of what mortgage payment holidays are and their long-term effect on your ability to take out credit.

What is a mortgage payment holiday?

A mortgage payment holiday is when your mortgage payments are paused for a fixed amount of time. For instance, during a three-month mortgage payment holiday, your mortgage payment will be zero for those three months. However, your mortgage will still build up interest during this time. You will also need to make up the delayed payments in the future, which could be over your mortgage’s remaining term (meaning your monthly payments would increase slightly after the payment holiday).

Who can take a mortgage payment holiday?

To be eligible for a mortgage payment holiday, your mortgage payments need to be up to date. Financial Conduct Authority (FCA) guidelines state that lenders must ensure that any agreed delay in paying your mortgage enables recovery through full repayment. In short, lenders need to make sure that you’ll be able to pay back your mortgage long term. If you have already missed mortgage payments, speak to your lender as soon as possible to find out your options.

If you have taken a mortgage break in the past, you can still apply for another one. You can also apply for multiple mortgage payment holidays if you own more than one property. However, there may be restrictions if your mortgages are with the same lender.

When should I apply for a mortgage payment holiday?

You should get in touch with your mortgage adviser as soon as you suspect you may have difficulties paying your mortgage. Don’t wait until you’ve started missing payments. 

You can also arrange for your mortgage payment holiday to start from a specific date. So, if you know you’ll be facing a fall in income in the future, you apply ahead of time. 

Does taking a payment holiday affect my credit score?

Since the announcement of the policy, the UK’s three main credit reference agencies (Equifax, Experian and TransUnion) have all confirmed that although a payment holiday would be recorded on your credit report, it should not impact your credit score. 

How do I apply for a mortgage holiday?

To apply for a mortgage payment holiday, speak to your mortgage adviser and they’ll put you in touch with your lender. Your lender will then assess your situation and let you know if a mortgage payment holiday is right for you.

If you’re worried about money, the Money Advice Service offer free, impartial advice on everything from debt solutions to monthly budgeting. For more information, visit their website.

Published date: 01/04/2020

Share this page:

 

 

 

Representative 15.9% APR (Variable)

Representative example: If you borrow £7,500 over 5 years at a Representative APR of 15.9% and an annual rate of 15.9% (fixed) you would pay £177.82 per month. Total charge for credit will be £3,169.20. Total amount repayable is £10,669.20. Minimum repayment period is 12 months. The %APR rate you will be offered is dependent on your personal circumstances. Freedom Finance is a leading credit broker and not a lender.

Baffle-free guides to borrowing

Loan_Guides.png

Loans guides

Loans can be super confusing, but never fear – our set of loan guides will help you beat the Baffles.

Loans Guides
Managing_Money_Guides.png

Managing money guides

It’s not always easy to know how to handle your finances. Our set of money management guides can help you out.

Learn more
Credit_Score_Guides.png

Credit score guides

Understanding your credit score isn’t always straightforward. But our guides will help put you on the right path.

Learn more

Read what our customers say

We're proud to earn a super-positive score from Trustpilot, the leading collector of honest reviews from real customers.