Many people have found themselves struggling financially as the COVID pandemic drags on for longer than expected. In this, having to pay your mortgage may be one of the largest stressors for most. With that, there are some actions you can take to help deal with this.
Always ensure effective communication with your lender. Speak with them if you are struggling to manage your finances and come up with a plan or budget system to repay your mortgage. If you are unable to repay, do not cancel or stop your direct debit without speaking and communicating with your lender first. On top of that, if you are unable to repay your mortgage in full every period, if you can repay it in a smaller amount than usual, then you should do that.
But even with everyone’s financial struggles during this period, the lender is not exempt from helping their clients. The lender may find that many of their clients are having issues with paying the mortgage in full and should be accommodating. But with that, the lender must also keep a rigid track of each client’s financial situation and the amount of mortgage that is being paid every period.
While you are working to sort out details with your mortgage lender, you may find that they give you different options on how to pay your mortgage. Some of these may include taking a partial or full payment holiday, as well as possibly extending the payment term on your mortgage. The most important aspect would be transparent and honest with your lender, so that you may collaborate and find an option that is best for you.
The specifics of a payment holiday will vary from case to case, but in general, a payment holiday is a period of time agreed upon with your lender that mortgage payments are not due. It is important to note that when the period of your payment holiday ends, you will still be held liable to pay back the total amount that you owe. In addition, as the payment holiday extends, interest will usually also continue to build, leading to increased payment amounts after your payment holiday ends. And as for how a longer-term mortgage plan will cause you to ultimately pay more in total for the mortgage, a payment holiday will create the same situation.
All-in-all it is important to make it clear to your lender your situation, to seek help if you are struggling during the pandemic. Explore all the options offered to you regarding your mortgage and come up with a long-term plan to continue paying your mortgage.