What is Mortgage Repayment Holiday?
A repayment holiday is exactly as the name suggests, to free yourself from your usual debt repayment within a fixed period of time. Also known as ‘repayment pause’, you may apply for reducing or avoiding repayment of a loan for a few months. And for some lenders, this can be up to 12 months. Mortgage payment holidays can be a good way to ease your financial situation if you are in financial difficulty.
Types of Mortgage Repayment Holiday
A mortgage repayment holiday is typically only available for borrowers who are ahead of their scheduled repayments, or for borrowers who had financial hardship applications approved by the lender. As repayment holiday is meant to help them manage their cashflows temporarily.
However, during Covid, repayment holiday is basically available to all homeowners financially affected by the pandemic. On top of that, government also provides other financial support, including business recovery loans.
What Options Will Lender Give For Repayment Holiday?
Once the repayment holiday is approved by your lender, they’ll inform the time frame and the amount that your repayment holiday will cover, as well as the new monthly payments once your holiday is over. Spreading your deferred payments over the remaining term of your mortgage, means that once the payment holiday ends, you will pay more per month.
Disadvantages of Repayment Holiday
Once the repayment holiday ends, your repayment is likely to increase, or your loan term is likely to increase.
Most importantly, repayment holiday will show on your credit report under repayment history information. So banks might decline your loan or credit card application if you have ever had any repayment holidays, as banks might think your income is not stable or consistent.
Have any questions about repayment holiday? Or had a repayment holiday before but now have plans to buy new property? Contact your mortgage brokers at MoreMore Finance to get some professional advice.
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