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!!

People can advise,by all means yes, but the downright nastiness from some posts is ridiculous..and not just on this thread.

There is absolutely no reason for people to be mean to the op.

However I do agree with this:
seeing as there's all manner of calculators on the Internet and the likes of Martin Lewis publishing easy to understand personal finance advice, no-one really needs to understand the calculations, it's pretty obvious that a payment holiday will add to the cost of a mortgage, so should only be used if you need to as it's an extra cost, not cost free or free money.

A 5 min Google would have sorted out anyone with this information.

Yes, you were naive, but oh well, what's done is done. See it more as something you have learnt for the future rather than being annoyed with yourself over it now.

I didn't bother with a mortgage holiday because my mortgage is very small but they did agree to stop all of the interest on my two credit cards for the duration and now I'm in a position to pay them off and there was no penalty for that. I had to ring them each month though for them to do it. Saved me £100 a month.

Overpay your mortgage by a bit every month and you will repay that £3000 very quickly.

Overpaying is an excellent plan for anyone with a mortgage generally. If rates drop, don’t decrease your monthly payments but continue paying the old amount. If you get a pay rise take half your extra cash every month and add it to your mortgage payments. You don’t just decrease the outstanding capital by the amount you overpay but you never have to pay interest on that amount again. Spread over 10 or 20 or 25 years that’s a lot of interest you won’t have to pay.

The only exception to this might be if your mortgage has penalties for overpayments or part redemptions so check the small print.

I think it had a bigger effect on people with less left on their mortgage

The monthly payment will go up more if you've not much time left, but the overall cost is more if people have longer left.

Eg the poster upthread who's mortgage is going up by 'only' £40 but has 10 years left will have an overall extra cost of nearly £5k, so even more than the OP.

It all depends if that extra you say you owe includes the monthly payments you missed and what basis your mortgage was on and there may be options to overpay and reduce the amount of interest paid depending on what basis your mortgage is calculated .

One size doe not fit all .

Also be grateful that interest rates are low at the moment . Could have been worse .

OP, you've made a financial cock up. But you won't be the only one. At least you read the latest letter and know the score now.

My sister took 3 months break. Repayment gone up by £18 a month with 10 years left on mortgage. She's happy.

My DC have both learnt compound interest at school.
And there are any number of "what would this change to my mortgage mean" type calculators about.

Still, if you'd not realised, I understand it must have been a shock OP. At least it will be spread out across (presumably) a long term, so individual monthly payments won't change so much. Maybe make a mental note to overpay (checking Ts&Cs first!) when you are more financially stable, to bring it down again?

I worked for years in a bank. People used to flat out refuse to read terms and conditions because they 'couldn't be bothered' etc and even when I tried to explain them they'd say they weren't interested in all that

I did the same, and IME these were often the sort who'd cry "Waaahhh I didn't know, they should have taught me in school, waaahhh!!!"

It's predicatable that, instead of taking responsibility, it's just one more thing folk seek to load onto schools, but I'm reminded of the old saying "education is what you get when you read the instructions; experience is what you get when you don't"

Always read the instructions / T&Cs / whatever's applicable

Using the example from earlier in the thread,
If before the "holiday" you owed £300,000 @ 4% with 15 yrs remaining you would have been paying £2,218/month. You now owe £303,000 @ 4% with 14.75 yrs remaining = £2,269/month, an extra £51/month.
The same figures but with only 10 years remaining pre-holiday would see your payments go up by £95 from £3,037 to £3,132.

It was made very clear in all the details I received, both in the summaries and the follow up postal documents. And online, beforehand. I’d have had to have worked really hard to miss it!

That would be correct. You’ve taken a holiday from making payments - the ‘capital’ part of your mortgage is still there and needs to be paid with the interest still. They haven’t written any of your mortgage off. You will still need to repay the amount your borrowed with interest. You’ve just had a holiday from making the payments! (Under normal circumstances if you don’t pay for three months they would be looking at repossession proceedings!)

Oh, that's nothing, Nixen, this one caller rang into Martin Lewis complaining that because her landlord had taken a mortgage holiday she shouldn't have to pay rent. Hahaha!

I must be a Marxist. I agree with her.

And I think it's shitty for OP's lender to shovel on the interest for a mortgage holiday taken in the middle of a global pandemic.

I do think the lender should make it clearer.

It has been made very clear by the lenders, Martin Lewis etc. but it's impossible to simplify things enough for some people. There have been people phoning their lenders who were under the impression that they were being let off three months of mortgage by the government.

Of course. What did you expect? Don’t people read the paperwork?

@Butchyrestingface and when would the tenant be making up the rent as the landlord would have to make up the mortgage?
Do you think people who own houses outright should let people live in them for free?

I agree it should have been made clearer. How much is your mortgage per month?

But the landlord isn't saving any money, as this thread illustrates. If they took the mortgage holiday, their costs will have gone up. But if they have a paying tenant in the property I don't understand why they would do that, unless they were using it to cover other loss of income that they weren't getting help with.

We didnt take a mortgage holiday and I did know you(as in the customer) would end up paying more....but 3k more sounds pretty hefty.
I wish I was as knowledgeable as most of MN.
I get pee'd off at all the ads for banks "we're on your side" and all fluffy and friendly but its 99% BS. It offends me that they charge to pay cash into your own account and most high street banks treat customers as if they are a complete PITA. (Of course some probably are but it's not unreasonable to want to put money into or withdraw from your account!!

While I did know the info the OP didn't, and also haven't needed a mortgage holiday, I don't think it was stupid not to realise that this wasn't a "break" (where payments would be added at the end). The OP didn't think it was a gift of three months' free money from the lender.

I was told by someone who worked in a bank (!) that he had not grasped that his fixed rate for gas and electricity was not an "all you can eat" deal , until too late when he'd been a lot more extravagant than usual.

Three cheers for Martin Lewis though, with his decent free advice, and also for campaigning for financial basics to be taught in schools

Oh, that's nothing, Nixen, this one caller rang into Martin Lewis complaining that because her landlord had taken a mortgage holiday she shouldn't have to pay rent. Hahaha!

On a thread started by a landlord, who was complaining that her tenants had decided not to pay rent, she was told by several posters to just take a mortgage holiday. When I asked if those posters understood a mortgage holiday didn't remove the cost of the mortgage for the months in question, those same people angrily said of course, we're not stupid. Well, if you're not stupid, why did you propose a solution that doesn't actually solve the problem?

Out of interest I just spent 30 seconds finding the online advice from Nationwide, the UK's biggest building society. Here it is - the very first item on the very first page:

If you’re thinking about a mortgage payment break, it’s important to know that:
Interest will continue to build at your usual interest rate during the payment break. This means your monthly payments at the end of the break will be higher and the total amount of interest you’ll pay over the term of your mortgage will go up, increasing the overall cost

The five other major lenders I checked said fundamentally the same thing - that payments will go up after the "holiday" because of the unpaid interest

And still some try to suggest this is somehow unclear ...