To not pay mortgage

[Liondoesntsleepatnight]

Due to a number of unexpected issues we’ve accumulated credit card debts, we did 0% transfers, paid a wedge off (not just minimum payment ) but want a mortgage holiday to clear the rest.

spoke to lender, they are suggesting interest only but it’s still £1300 a month, however - in the past two years we’ve over paid (my work bonuses) to the tune of £25k. We’ve been told that if we stop paying we won’t be in arrears, until credit runs out, is that right?

I just want 6 months off, then over pay to get back to where we were.

That’s a lot of mismanagement of money imo, why are you overpaying your mortgage but then leaving yourselves open to build up credit card debt?

Get it in writing from them
And then hold them to it
Do you need to remortgage any time soon?

You need to contact your specific mortgage provider and ask for their policy here, because you really can’t afford to get it wrong.

I know this would not be the case with our mortgage provider. Usually when making overpayments you can either reduce the term or reduce the payments, unless you have explicitly and clearly arranged for a payment in advance set up overpayments are not a “credit”, they are additional payments towards the debt you very much do still owe.

In most cases if you stop paying then you’d immediately be in arrears, regardless of overpayments, you still owe them you haven’t got a “credit” really, you’ve just got less debt.

Some lenders do have the ability to create an overpayment reserve but the majority simply deduct all overpayments to the balance of what you still owe so you’d absolutely still be in arrears if you stopped paying.

You need to find put where the overpayments went. Is it some kind of offset mortgage account ? If the ££ paid off capital you canmot get the money back without selling house.
Just pay the interest only and do not over pay mortgage to then get into debt .

Who told you that you won't be in arrears if you simply opted out of paying? If it's anyone other than the lender, don't believe them. Since the bank suggested interest only and not a payment holiday, I would guess what you want isn't an option.

The thing is, the bank will have bundled the mortgage up with others and sold it as an income stream to someone else, who would view it (rightly) as a default. This is more or less how the subprime mortgage crisis which triggered the Great Financial Crisis began.

Please make an appointment and speak to them properly. Have they confirmed why you can’t have a mortgage holiday.

Crikey, if £1300 is the interest only payment, you must have a very big mortgage! Like other posters, I suggest checking the small print on the policy.

But even if it were allowed, taking a mortgage holiday would just be transferring unsecured short term debt to a long term debt secured against your home. You term it as ‘paying off the debt’ but if really isn’t at sll

A very bad idea OP.

my thoughts exactly.

And @Liondoesntsleepatnight yes it is right.
A mortgage isnt a bank account...its a debt. you cant randomly overpay then decide you want to claw it back or draw the money down.

Take the 1.3k per month offer and thank them.
Make those payments.
The last thing I would be doing is playing silly buggers with mortgage payments and credit scores right now. Itsl would be an incredibly stupid thing to do particularly in this job economy.

With 25k net bonuses over 2 years you are clearly earning well enough
Pay the debt off over a long period and / or reduce unnecessary expenditure.
then build savings.
Do not overpay the mortgage until you have 6 months of living costs as savings.

We’ve been told that if we stop paying we won’t be in arrears
I would not believe this for a second unless I had seen it myself in my mortgage contract and/ or had it confirmed in writing. Its unlikely to be true

You alone?

It's not clear.

The comments about mismanagement are off…it’s already happened they are trying to sort it out. They prob already feel rubbish, not everyone’s perfect!

Back to the OPs actual question: yes nationwide use to do this and it was written in the t&c. Just to be super careful contact your actual mortgage lender and check. If it helps you get back in your feet do it. It’s a no brainer

Yes you can do this under the Mortgage Charter with no damage to your credit score. We went interest only on our mortgage via this method for my maternity leave which dropped payments to £300. This meant I could have the full year off. Prior to that we overpaid on the mortgage. Payments resumed as usual after 6 months.
Doesn't seem to be very well known

I’m pretty sure mortgage holidays were only brought in during Covid due to to the unique circumstances of the pandemic, and are no longer available.

With my bank they deduct my overpayments immediately from capital, i.e. when it’s gone, it’s gone, and cannot be use to pause future due payments or applied again.

DO NOT just stop paying the mortgage; you are likely to go straight into arrears.

You need to speak to your bank’s debt management division to go through your circumstances, and have them put in writing what you are signing up to. The bank needs to do this by law, do not rely on hearsay.

Surely mortgage overpayments are deducted from the balance of the mortgage itself thereby reducing the ongoing interest element of each month’s payment. I didn’t think it just sat there on the account as “credit”. So you’d be in arrears from the first month.
Dont make your debt long-term unless you’re damn sure it will never happen again. Eg - the funeral of a close family member is a one-off, clothes, shoes, holidays, birthday meal are not one-offs.
And never overpay the mortgage until you have six months outgoings stashed away somewhere.

Mortgage holidays have been available for years, I had a couple about 20 years ago and lenders still do them now

Yes, but the OP doesn't want to go 'interest only'. That is what the lender has suggested. She wants to pay nothing.

Don't ask MN if that's right - ask your mortgage lender AGAIN, and get them to put it in writing.

Personally, I would keep paying your mortgage as per normal, and do the Dave Ramsey Debt Snowball on your CC debt.

Ah I misread, I see OP wants to pay nothing. I'm sure you can't do that. Interest only would be better surely?

It’s Halifax and yes I spoke to them.

Nationwide still do this, though it's they say it's an underpayment that is allowed - so not sure if you could pay nothing. You have to arrange it with them in any case.

I can't remember it being a feature of Halifax, though that was a few years ago now. I'd certainly want it in writing from them!

Mortgage holidays have been around for decades.

No they have always been around. The interest still gets charged and added to the balance.
They can be very useful but they are expensive

Another thing you could potentially do is change the term of your mortgage. Perhaps you could extend it for now which would lower the repayments and then change it back again in a couple of years when you are more secure.
Be careful though as you don't want to do this if you can't reduce it again

Mortgage holidays have always been around, yes.
They’ve also always been a monumentally bad idea, massively expensive and rarely address the issues around short term debt.
Sensible in times of dire straights to avoid losing your house. A very bad plan otherwise

My lender also offers this - and has done for a long time (had first mortgage with them over 20 years ago). Very simply, if you've made overpayment payments of e.g. 10k and your normal monthly payment is £1k then you can take a 10 month payment holiday (might not work out exactly like that - but that's the general idea). It's important to realise that you keep accruing interest during this period so it would be better to pay interest only if you can afford it. Agree with PPs that you've made what seems like unwise financial decisions if you've been overpaying mortgage while relying on credit.