A temporary reduction in your monthly payment is where you agree a reduction to your regular monthly mortgage payment for a set period. This option gives you some temporary breathing space and may be suitable in situations where you are experiencing a short-term reduction in your income or have an unexpected outgoing.
Any ‘missed’ part of your regular monthly payment will accrue as payment arrears, which will impact your credit file.
Things to think about when considering a temporary reduction in your monthly mortgage payment:
- This is a short-term solution, so we will want to review your affordability now and in the future. This helps us to understand what your options will be when the agreed support comes to an end.
- We will report any missed mortgage payments to the Credit Reference Agencies (CRAs). This could make it harder for you to borrow money in the future.
- You’ll need to make up the missed payments, which will attract interest at the same rate as the mortgage until paid.
You may be offered a temporary suspension of your monthly payment if you can’t afford to pay any amount. In this scenario the full monthly payment is considered ‘missed’ and will accrue as payment arrears, impacting your credit file. This option is typically a very short-term solution to help you manage a large, unexpected expense, or a temporary loss of income.
Things to think about when considering a temporary suspension of your monthly mortgage payment:
- This is a short-term solution, so we will want to review your affordability now and in the future. This helps us to understand what your options will be when the agreed support comes to an end.
- We will report any missed mortgage payments to the Credit Reference Agencies (CRAs). This could make it harder for you to borrow money in the future.
- You’ll need to make up the missed payments, which will attract interest at the same rate as the mortgage until paid.
If you currently have a capital repayment or part and part mortgage, you may be offered a temporary switch to interest only. This will reduce the amount you pay each month, because your payment will only cover the monthly interest charged. However, the total cost of your mortgage will increase as you will not be making any payments towards the capital.
Things to think about when considering a switch to temporary interest only payments:
- Temporarily switching to interest only will be recorded on your credit file as a change in your repayment terms, which could affect your credit score and future borrowing.
- As you are only paying the interest for a set period, the total cost of your mortgage will increase as you will not be making any payments towards the capital.
- When your temporary interest only period ends, your regular monthly payments will increase to make sure your mortgage balance is paid within the remaining term.
- If you already have a payment arrears balance due to missed mortgage payments, this will remain on your credit file until it is paid.
- Interest is charged on any outstanding payment arrears at the same rate as your mortgage.
Missed mortgage payments will always be reported to the Credit Reference Agencies, which is why you should always prioritise your mortgage and pay what you can afford.
Support options are designed to help you in the short term but remember lenders
will be able to see that you are on some form of payment arrangement with your
mortgage.
This ‘arrangement marker’ will be removed once the arrangement has
ended. Lenders will still be able to see that an arrangement was in place in the past,
but the affect should lessen over time.
