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!!

The term "payment holiday" does make it sound as though you just stop paying for 3 months, with no penalty. A better term is needed to describe it. A mortgage extension or an interest acquisition only period...

A valuable lesson to you OP and everyone else.

Never, ever, ASSUME. You are more than likely end up in shit creek without a paddle.

If you have made assumptions and find yourself in said shit, don't look for someone to blame - unless it's in a mirror.

Accruing interest might not be the only issue with taking a mortgage holiday, as Martin Lewis has pointed out – when you come to remortgage, the more unscrupulous lenders could use it against you as a sign you are financially struggling and it could affect your credit score.

www.moneysavingexpert.com/news/2020/05/payment-holidays-may-hurt-mortgage-application-chances-via-the-b/

It'll have to join the queue behind complaints from people who didn't understand that they weren't actually paying off their mortgage if they took out an interest only mortgage. There have been people sadfacing the financial pages when the bank also expected them to repay the capital at the end of the term.

Oh god please tell me you're joking?

These people are allowed to vote on our future! It's terrifying.

OP how much are your repayments per month? Do you mean you owe them 3k in interest on top of payments?
Apologies, not read the full thread. Now panicking as we've also taken a 'holiday' as DH said interest would be minimal...

plain unfortunately not. Google mis sold interest only mortgage, there's loads of stuff on ombudsman website, MSE, news reports etc.

Jon your interest payments might be minimal, depends on the rate and mortgage amount. Sounds like the OP has a large mortgage at quite a high rate.

Small mortgage, lower rate and the extra cost could indeed be minimal.

Aww OP - I wanted to comment so you didn't feel too alone. I thought similar, as the were calling it a payment holiday I thought it meant they would freeze the mortgage and add the months I missed on to the end. Luckily I had a friend who pointed out the fact there would be interest applied and I didn't go through with it. But I can see how easy it would be.

@Dementedswan

We took a 3 month mortgage break and our payments have gone up by £7 a month for the remaining term.

Wow! Are you on interest only? Or very low mortgage? Or very long remaining term? Mine has gone up by £45 pcm... 😔 I was wondering whether I should have another holiday but I think my payment would go up by £80-100 pcm by the end of it and that would be risky...

@Dementedswan - sorry saw your update the next page ☺️

So I know it is up to the customer to read terms and conditions (and I did realise you would pay more if you took a mortgage holiday) I think stuff like how credit cards and mortgages work would be way more useful to learn at school, than for example quadratic equations, reflections from a certain fixed point and trigonometry which very few people actually use outside of school. If you read t and cs coming from a point of knowledge they will be way easier to understand tha an alien concept.

This is interesting. OP, as other have explained its juatvwjat you didn't pay spread out. Still painful though.

When I got my first mortgage the bank offered to lend me enough that once I paid it I would have enough to pay insurance and travel card + £200 for me and DH to meet all other expenses, including food.

Banks and individuals are both irresponsible for not thinking these things through more.

Blimey you have been spoken to very harshly here. It must have been a shock to see such a big amount OP.

Surely this is a wind up?

I find it helpful to model the entire mortgage on a spreadsheet, showing the current balance, the interest added each month, the mortgage offset balances, and the monthly repayments.

My spreadsheet shows every month from now until full repayment. It allows me to model what happens if I overpay by £x each month and the effect that has on the mortgage term. It would also have shown what would happen if I took a repayment holiday, which I'm not planning to do as it's not in my interest.

@BlingLoving

**
When I got my first mortgage the bank offered to lend me enough that once I paid it I would have enough to pay insurance and travel card + £200 for me and DH to meet all other expenses, including food. **

As a separate loan? Or as a mortgage more than 100% of the mortgage?

@Apossibility

They wanted to offer us something like 4.5 x our combined annual salaries in a mortgage (he didn't specify whether it would be 100% or not but we had always planned to pay a deposit of at least 10% so perhaps that was the offer?).

It was totally outrageous. I had a very good job, probably pretty stable and dh was badly paid but also very stable. And that is what his computer spitted out. When I pointed out how unaffordable it was he did tell me that they were changing their systems to only offer 4x annual salary shortly....

In the end, we accepted a mortgage that was about 2.5x our annual salary.

The standard offer in the late 1970s was 3 x larger income plus 1 x of smaller income. So in today’s money: £50000 x 3 = £150,000 + £30,000 so a loan of £180,000 for such a couple. £80,000 x 2.5 = £200,000 so that’s more than you would have got 40 years ago but - interest rates are now tiny. Our first mortgage had interest rates of 15%. So there is more room for manoeuvre on multiples. My DD has been offered around 4.25 multiple of her income but it’s only 60% of the flat value. All this makes a difference and whether the jobs you have a “safe”.

There was a thread here a while ago about how much money some people were saving during lockdown.

Someone boasted about how much money they had been able to put into their savings account as a result of having a mortgage holiday. I was speechless...

I rent and even I knew this. Lesson learnt OP, read the fine print in future.

I find it helpful to model the entire mortgage on a spreadsheet, showing the current balance, the interest added each month, the mortgage offset balances, and the monthly repayments.

We did this in 2000. In Excel on a PC running Windows 95.

@ProfessorSlocombe and me!!! Bought my first flat in 2000 and reconciled all the statements annually

Your lender was required to give you this information in line with the government rulings at the time if you can prove that they did not then you can possibly make a claim against them to get it lowered but they will have recorded all calls. Good luck

seriously I am not sure how you not know about this, they give you so much warning.
Even when I was made redundant and unemployed I made sure I covered my mortgage. I never took up the option of payment holiday because of the consequences.

Think this was another Government Directive to the mortgage lenders. Complain to Boris Johnson.

Banks are generally taking the payments you should have made and spreading them out over the remainder of the loan period, added to the regular mortgage amount. I think you can ask to extend the loan period instead, so if it was due to be paid off in June 2030 and you took three months mortgage holiday, it would be paid off in September 2030 instead. But it's up to your bank if they want to offer that option. All of this should have been made clear to you by the bank - I'm sorry if they didn't explain it at the time.

DisobedientHamster - if a landlord gets a mortgage freeze for a buy to let property they are supposed to offer a rent freeze to their tenant.