Took a mortgage holiday and now I owe a shed load more!

[Dingdong99]

This is probably very naive of me but I had assumed that if you take a mortgage holiday, your mortgage would be frozen

I've had a 3 month mortgage holiday because of everything going on, and have now restarted again, and had a statement come through to say I owe an additional 3k!!

[whenwillthemadnessend]

It's not free is frozen so you still owe the money.

Look on Martin Lewis website he explains it well.

[Apossibility84]

@Byebye1to1

I too assumed it would be as the dictionary says....’ a short period during which the payment of instalments, tax, etc. may be suspended.’

So this that a Legal definition of a mortgage holiday?

And even if this was the case (it isn’t) - the key word there is may and it would have been abundantly clear in the t&cs when the OP took the mortgage holiday that the may was not applicable as interest would be applied.

[Apossibility84]

And what dictionary are you referring to?

[Apossibility84]

You made an assumption
The OP made an assumption

We are talking about very sizeable sums of money here.

Assumptions have no place!

[CeCeDrake]

I knew there would be extra added on but I have to admit I could never have imagined it would have been an extra £3000!
Although I’m sure it depends on how much your mortgage is.
We have to pay £345 extra over the space of 20 years and have 3 extra payments added on to the end, which is fine and I will probably pay over the course of this year but think if that would have said £3000 I’d have hit the deck!!
I hope you’re okay financially OP, this time has been a strain on a lot of people!

[SweetPetrichor]

Don't sign on the dotted line if you don't know the terms. I can't believe how many people fail to understand what they're agreeing to.
My DP works for a utilities company and every day probably half the calls he gets are people who don't understand why they're accruing debt...somehow they thought it was free leccy. And people who think you pay a fixed monthly price and that it's an all you can eat service. It's madness how naïve/stupid people are.

[Brockaslass]

I applied for a payment holiday on my credit card and a loan. When I was given them my loan said Interest would be frozen but credit card warned me it wouldn't, I therefore chose to carry on paying the credit card so I didnt accrue interest. The media is full of warnings about this at the moment Money Scaings Experts have advised you always check. Read through everything they told you at the time. If you have just failed to do this then you don't have a leg to stand on but if the failed to tell you or made it hard for you to find out you may be able to take it to the Financial Ombudsman

[BubblyBluePebbles]

As soon as some people hear 'you don't have to pay...', they'll sign up for it ASAP without even looking into it any further.
It's called greed. Nothing is for free. As other posters have said, banks make money by charging us interest. We pay banks to look after our money. The banks charge us interest on money they loan to us (bank loans, credit cards, credit in general). How do people think banks make their huge profits are are able to lend people huge amounts of money???

Read the small print & terms and conditions. If you still don't understand, ring up the company and ask questions. Start with the main glaringly obvious questions:
'How is this financially beneficial to me right now and in the long term?'
'What are the pros and cons here?'
'How much will my payments go up by in future?'
'Will I owe more money in the long run?'

This is exactly why basic financial planning should be taught in schools. Unfortunately, not all children will have parents that understand this and/or are be able to pass this knowledge down to them.

If you're simply rubbish at finances and/or do not understand, you can employ a financial advisor, accountants, etc to manage your finances, but obviously not everyone can afford to do so.

[TriangularRatbag]

As soon as some people hear 'you don't have to pay...', they'll sign up for it ASAP without even looking into it any further.

So true! Some people have an inbuilt tendency to live for today and deal with tomorrow when it comes around. This is evident in everything from mortgage holidays to credit cards, failing to save, lack of pension planning, attitudes to furlough and covid19 strategy. There's often an element of willful ignorance. Even if people try to explain the consequences of their shortsighted decisions they don't want to hear it.

[Honeyroar]

I’m finding a lot of people at my work (including myself) don’t understand our pensions or even how we’re paid (we have different payments triggered by different things and certain parts of the wage is taxed differently than others so wages vary hugely from month to month). A lot of people lack basic finance training - that’s why I thought it would be a good subject to add into Maths at school.

[wondering7777]

My bank gave me the option of extending my mortgage term by the length of my payment break. I’ve just checked the letter they sent me and it says: “This will keep your payments at a similar level to your previous monthly payments, but your mortgage will end later.”

Does this mean I’ll be paying a lot more in interest? I’m worried now!

[contrmary]

The point of the mortgage holiday was to help people who saw a sudden drastic reduction in income keep the roof above their head. Assuming the OP and everyone else who took the break was in that position (and not just thinking "free money gimme gimme gimme"), the increase in payments seems a better alternative than wrecking your credit score and falling behind on payments.

I didn't take the mortgage break because I didn't need to. My income dropped but a cursory check made me realise taking it would put my payments up by nearly 10% for the rest of the term. A "similar level" to before, probably a manageable one for most people, but not worth it in my circumstances.

[My0My]

When this idea was floated I remember Martin Lewis and others giving details of how it would work with real examples. I cannot believe people make decisions without reading up on the costs or consequences. It’s vital.

No, it doesn’t need to be taught in school. Big yawn for most 15/16 year olds. Better to have a decent grasp of the maths in terms of compound interest etc and then read up on the info given to borrowers by the banks etc. Slime people don’t get w mortgage until they are in their 30s. Years have gone by and plenty of time to forget school lessons.

[Pinkbunny2811]

I paid 2.5k extra once and it knocked off 3 months off my term and said that I'd saved 1.4k in interest. So yeah, sounds about right.

Lesson learnt, you won't do that again. Not without expecting that you'll repay extra in other months to reduce the added interest.

[FAQs]

I had to take a mortgage holiday due to a 35% pay reduction. The process was just ticking three boxes, length, am I the mortgage payer, was my income affected by Covid, and no explanation or warning given.

I did however go on the Martin Lewis calculator first to work how it would impact payments etc but I was surprised at the lack of info provided by the mortgage company, especially at a time where people where in financial distress.

[FAQs]

There is a lot of people projecting their nasty vitriol to make themselves feel superior over others.

[Fattyboom]

Woahhhhh! I think that if people have had to ask for a mortgage holiday, then there is a pretty good reason for it

Not necessarily, I know several people that took one because they could, even though the pandemic had no effect on their jobs at all. They decided they would use it to treat themselves 🤦‍♀️

[XingMing]

I don't think mortgages should be taught in school, but an element of financial literacy is useful. We used to ask Y8s to plan a holiday (flight, accommodation and spending) so they understood how much they would need to save. But I think they should also understand how their mobile phone charges are paid for, and what they get at 13 or 14, and about car insurance/driving lessons when they are approaching 17. The lessons have succeeded even if all the teacher manages is to introduce the idea that it's good to shop around a bit.

[ProfessorSlocombe]

I don't think mortgages should be taught in school, but an element of financial literacy is useful.

and an element of dealing with everyday life. Little things like how our legal system works. How our democracy works. For a start. Although as someone who has benefitted from knowing both at the expense of those that don't, maybe I should keep schtum ?

[Apossibility84]

@wondering7777

* My bank gave me the option of extending my mortgage term by the length of my payment break. I’ve just checked the letter they sent me and it says: “This will keep your payments at a similar level to your previous monthly payments, but your mortgage will end later.”*

Does this mean I’ll be paying a lot more in interest? I’m worried now!

In all seriousness, do you understand mortgages? Not any complexities, just the very basic question - what is a mortgage?

In answer to your question, yes you will pay more interest.

[McGriffo]

[quote Apossibility84]@wondering7777

* My bank gave me the option of extending my mortgage term by the length of my payment break. I’ve just checked the letter they sent me and it says: “This will keep your payments at a similar level to your previous monthly payments, but your mortgage will end later.”*

Does this mean I’ll be paying a lot more in interest? I’m worried now!

In all seriousness, do you understand mortgages? Not any complexities, just the very basic question - what is a mortgage?

In answer to your question, yes you will pay more interest.[/quote]
The poster asked whether she'd be paying a lot more interest, not whether she'd be paying more interest.

[excuseforfights]

I’m guilty of signing up to mortgage without really understanding. DH had a spreadsheet. Weirdly I do do some financial modelling in my job so I’m perfectly capable of understanding if I put my mind to it.

However I’m now suffering as DH signed us up to a 5 year mortgage term and I’m leaving him now and we face a huge penalty for leaving the mortgage early.

[Apossibility84]

But how on earth can we answer that without knowing the sums involved?!

[Apossibility84]

Or indeed the term of the mortgage?

[Pinkbunny2811]

@XingMing that's a really good idea. Hopefully it works. I know people that don't know how to book a holiday and have to ask someone to do it for them!