Handling Mortgage Arrears – Terminology

Moratorium: The lender agrees to freeze the repayments on the mortgage account for a specified period, normally 3-6 months. The borrower, with the consent of the Lender, makes no mortgage repayments during this period. This is most suited to a borrower who believes that their current financial issues are short term and their situation will improve in the coming months. What happens is that the borrower makes no payments to the lender on their loan however the interest that falls due is capitalised added to the loan, so the overall debt increases.

Extension of Term: The lender agrees to increase the term from 20 years to 30 years, this reduction in the monthly capital portion of the mortgage means the borrower will pay a reduced monthly premium. however the loan will take longer to repay, resulting in a massive increase in the total cost of credit.

Interest only Facility: The lender agrees to accept interest only payments for a limited period of time. This suits a borrower who is struggling to meet their current monthly repayments but are able to …

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