It’s fair to say that the pandemic has caused a strain on life during 2020. It’s probably also fair to say that this has been felt fiercely in our finances. Managing a mortgage during the COVID-19 crisis hasn’t been easy. However, in this post, I’m going to be looking at ways some of us are staying afloat during such an uncertain time in our modern history. While I don’t have all the answers, there may be a few tips in this post that can help you out.
Remember, if managing a mortgage is becoming difficult, talk to your bank, building society or lender. There may be ways they can help you out, so don’t struggle in silence. Be honest and talk to them, you might be pleasantly surprised by the ways they can help!
You may also find my post on moving house during COVID-19 helpful, especially if you’re a first-time buyer.
Managing a mortgage
It goes without saying that a mortgage is a huge, long-term commitment. If you’re already tied into one then you’ll know that you’re legally required to keep up repayments on your home to avoid repossession. However, for many people who lost their jobs or had to be furloughed during the first wave of the pandemic, this proved difficult.
Thankfully, many lenders allowed homeowners to take a mortgage repayment holiday, meaning repayments could be paused in the short term. According to Experian, one in seven UK homeowners arranged a mortgage repayment holiday due to coronavirus.
As we now move into our third national lockdown, it’s important to be aware of the support that’s still available to mortgage holders. If you’ve already received a repayment holiday that’s lasted over 6 months, you’ll be ineligible for another one. However, if you didn’t request a repayment holiday during the first period of lockdown, you may have options to discuss with your lender.
How to apply for a mortgage repayment holiday
The current guidance on mortgage repayment holidays from the FCA is as follows:
You can request a payment holiday of up to 6 months in total, but lenders can only agree a payment holiday of up to 3 months at a time. They can then agree to renew your payment holiday after the first 3 months, as long as this doesn’t take you over the 6-month limit.
You need to apply by 31 March 2021 and all payment holidays must end by 31 July 2021. Remember, carefully consider if you need a payment holiday – and make payments if you can.
- If you are newly affected by coronavirus, and you want to benefit from the full 6 months available, you should apply in good time before your February 2021 payment is due. Your payment holiday will then run between February and July.
- If you’ve already taken payment holidays of less than 6 months, you have until 31 March 2021 to apply for another payment holiday.
After 31 March 2021, you can extend an existing payment holiday up until the 31 July 2021, as long as:
- it doesn’t go over the 6-month payment holiday limit
- there are no breaks in the support
Managing a mortgage if you’ve already had support
If you’ve already had a mortgage repayment holiday you can reapply but only if it hasn’t extended past the 6-month threshold. If it has, then the best thing to do would be to speak to your lender about what tailored support they can offer you. This means that lenders will look at situations on a case-by-case basis and potentially offer extended support or come to an arrangement with you on repayments.
The worst thing to do is to stop paying altogether because that can have a negative impact on your financial standing with your lender and also your overall credit rating. It’s always best to be open and honest about your financial situation with your lender. That way, you’ll be able to work together to come to a manageable solution for both parties.
What about first-time buyers?
It has been harder for first-time buyers to get a mortgage approved over the last twelve months. Due to lenders struggling to do physical valuations of properties, mortgage approval rates fell considerably over the first lockdown. Additionally, many of them tightened up their lending criteria and were a lot stricter on the deposit amounts required to buy.
However, many first-time buyers have been able to calculate their options for mortgage repayments and plan ahead for their purchases due to the fall in interest rates on fixed-term mortgages. Using tools like this can save you a lot of hassle in the long term and can equip you with a bit of prior knowledge before approaching a lender.
There’s also the chance to take advantage of the temporary holiday on stamp duty, which is effective until the end of March 2021. The pause on stamp duty could mean a big saving for potential first-time buyers and home movers. So, it’s not all bad news!
Advice and further financial support
There’s no denying that this is an especially difficult time in our financial lives. The UK economy has taken a hard hit in general due to coronavirus. Now, with the advent of a third lockdown, things aren’t easy to predict.
If you’re facing difficulties with mortgages, debt and day-to-day finance, I recommend checking out this Money Navigator Tool from the Money Advice Service. Make use of the online tools, calculators and budgeting apps that are currently available. Many banks, building societies and other fintech apps can provide advice, support and services to anyone struggling with their financial situation in light of the current circumstances.
How are you managing with your mortgage?
I know it feels like discussing finances isn’t something you should do online. Generally speaking though, this is a time for us to help one another. If you’ve had good experiences with your lender and would like to share them here then I’d love to hear from you. Equally, if you know of a good app or service that people can use to help manage their money during this difficult time, let us know in the comments below.
There shouldn’t be as much stigma around discussing money and finance as there is. I know I’ve found it difficult as a self-employed person to contribute my fair share towards the mortgage repayment over the last year. It’s only through using the online tools I’ve found and being honest about my finances that I’ve been able to manage so far.
Let me know your thoughts in the comments below.