Many of today's mortgages come with a feature known as a mortgage payment holiday. This allows the borrower to, on occasion, delay making a mortgage payment for a set period of time. A mortgage payment holiday must be agreed by the lender and it's only ever a temporary arrangement.

Why would I take a mortgage holiday?
Basically, during months when you know money will be tight, you can take the pressure off yourself a little by deferring mortgage payments and allocating that money elsewhere. For example, to cover Christmas bills, to pay for a holiday, or to get your car fixed.

How long does the mortgage holiday last?
The length of the break will depend on your mortgage lender. For example, Northern Rock allows a one-month payment holiday every year, while Halifax offers up to six months over the life of the loan. Factors that determine how long a holiday you can take include what lender you're with, the features of your particular mortgage deal, and payment history.

The downside of mortgage holidays
There's no such thing as a free lunch - or a free holiday! When you suspend payments, the interest on your loan continues. This means at the end of a mortgage holiday, your mortgage debt will be higher because any unpaid interest will be added. Therefore, when you recommence paying the mortgage, repayments will increase.

How to I apply for a mortgage payment holiday?
Contact your lender and ask if you can take a mortgage holiday. It may already be a benefit of your particular mortgage, in which case it could be arranged there and then. If not, it may still be possible to arrange a holiday. Due to the current financial climate, the government is putting pressure on all banks to help struggling homeowners by allowing flexible payment options.

Homeowner Mortgage Support Scheme
For those with more serious financial worries, a simple mortgage repayment holiday may not be enough. The government has promised to help reduce home repossessions during the downturn by introducing the Homeowner Mortgage Support Scheme. This initiative has been designed to help people who have suffered a loss of income on a temporary basis due to the economic recession, by deferring part of your mortgage payments for up to two years.
There are eligibility criteria you have to meet to receive this assistance, however, and the government will not be making your payments for you. The reduction in payments will be added to the principle of your loan, to be paid back at a later date when your finances are in a better position. This might be a good alternative to a mortgage repayment holiday for those with more serious financial worries.

Do you really need a holiday?
As mentioned before, there's no such thing as a free holiday. Always remember that if you take a mortgage repayment holiday your mortgage debt will grow, which means your monthly repayments will also grow. So always weigh up this fact and assess whether you can afford the increased repayments before taking the mortgage holiday plunge.

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Article Submitted By: Kate Tee
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