Taking a holiday… from paying your mortgage
The commitment of mortgage repayments, is likely the largest expense your clients have each month. This is why taking a break from paying their home loan could be the solution to temporarily alleviate financial burden.
Putting home loan repayments on hold
A mortgage repayment holiday is when the loan repayments are put on hold for a period of time. This will need to be approved by the lender, and the holiday period can be anywhere from three to twelve months, depending on the lender’s criteria.
Who needs a repayment holiday?
There may be times when circumstances like change of employment, maternity leave or a career break are foreseeable, and then there are unexpected life events such as sudden loss of income, divorce, illness or a death in the family. Whatever the situation may be, if your client is struggling to pay their mortgage, a repayment holiday can help to reduce financial stress.
Lenders have different requirements and some may want to see that the home loan repayments are up to date or extra payments have been made on the loan while others may have other requirements.
The downside, is that during the term of the holiday, interest will keep incurring on the loan, meaning it will likely cost the client more and increase the loan term.
It’s important to remember that a repayment holiday is not a long-term solution if there are serious financial problems, and there are other avenues your clients may want to explore, such as reverting their loan payments to ‘interest-only’.
If your clients need a break from mortgage payments or are simply having trouble making ends meet, the invaluable guidance of a mortgage broker can help to put a strategy plan in place which considers their individual situation.