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Mortgage Payment Holidays – Are They Worth it?

When times are tough, many of us look to find ways of saving cash so that we can keep our heads above the water. One way to do this is to apply for a mortgage holiday so that you can increase your cash flow without the fear of losing your home. However, before you proceed with this money-saving step, it is vital that you are aware of both the pros and the cons – we've shared some here for you!

What’s Great About Mortgage Payment Holidays

Whilst the pros of a mortgage payment holiday may seem obvious, it is well worth considering what you are trying to achieve by taking one:

  • Your Financial Pressure Will Be Reduced – if you face a short-term financial loss, then a mortgage payment holiday may be perfect for you as it will give
  • you the reduction you need until your income increases again.
  • You Will Have Breathing Space to Make a Plan – a mortgage payment holiday can also give you the time you need to make a longer-term plan without having your finances negatively affected.

What’s Concerning About Mortgage Payment Holidays

Despite the obvious pros, there are several cons to taking a mortgage payment holiday. Being aware of these cons will help you make the right financial decision for your circumstances:

  • Holidays Mean Higher Repayments – taking a payment holiday means that your outstanding balance will be higher at the end of the break than when you started, meaning higher repayments each month to cover the break.
  • Payment Holidays Can Affect Your Credit Rating – even if you have an excellent credit rating, a payment holiday will have a negative impact on your credit score. It will be reported on your credit file, making future credit much harder to obtain.
  • Payment Holidays May Not Solve the Problem – if your financial problems are not short term, then a mortgage payment holiday may not solve the problem but delay it instead. If you are facing a serious financial problem, speaking to a financial advisor or debt charity is the best step before agreeing to any repayment holidays. The good news is that debt charities provide free advice and will help you resolve any issues you are facing.
  • Your Mortgage Interest Will Keep Accruing – even when you have agreed to a repayment holiday, the interest on your mortgage will continue to grow on the remaining balance.

Making the Right Choice for You

Ultimately, if you are in a position where you need to solve some of your financial concerns urgently,, then a mortgage payment holiday may be the only solution. If this is true for you, then it is important that you make yourself aware of the implications and only take the absolute minimum break needed to get yourself back on track.

How to Buy a House at Auction

Buying a house at auction is a great way to get a good price and find something affordable. Many houses that go to auction need some TLC or additional input in terms of redesigning space, but if you are up for a challenge and want to create something that reflects your design goals, this is a great way to do it. Check out our top tips so that you can buy your auction property with ease!

Research Any Property That Takes Your Fancy

Taking the time to research the properties up for auction and the auctioneers that provide sales is important when choosing who to go with. It is also important to note that most auction catalogues are only published four weeks before the date of sale So, you will need to become good at checking them out quickly to give you enough time to explore any specific places that interest you.

Organise Viewings Before the Auction Date

Once you have trawled the auction guides and found a property that you like, contact the auctioneer to arrange a viewing. If the property will need a lot of work, then it is a good idea to take a builder with you or someone that can help you work out whether the investment is worth it or not. Failing to view a property can result in financial loss, and so it is essential that you check out any property you like before placing a bid.

Get a Copy of the Auction Particulars

Whilst the auction catalogue will provide you with an idea of what is for sale, the auction particulars will give you a fuller picture of the property you are interested in and can be requested from the auctioneer. If you find that the legal information lacks searches, then get these done before the auction date and make sure to ask your solicitor to check for loopholes, covenants or issues that may cause you more hassle than you had considered.

Decide on Your Budget

The thrill of bidding can result in the downfall of many auction-goers, and so it is important that you decide on your budget before the big day and then stick to it, even if you are tempted to go over! When working out your budget, think about the cost of the property plus any work that will need to be done to get it up to a liveable standard, rather than spending all your cash just buying the place.

Have Your Finances in Place

Before you can buy at auction, you will need to have your finances in place in case you are successful. You do not need to be a cash buyer, but you will need to arrange any finance swiftly after the sale and have a deposit in place and ready to go. From traditional mortgages to auction finance, make sure that you check out all lending options before making your decision.

How Auctions Work

Finally, take the time to read the guide to auction etiquette provided by the auctioneer so that you act within the rules and achieve the outcome that you want to get. If you are new to auctions, it is worth visiting a few before you are ready to buy so that you are aware of what happens. Finally, take the time to read the guide to auction etiquette provided by the auctioneer so that you act within the rules and achieve the outcome that you want to get. If you are new to auctions, it is worth visiting a few before you are ready to buy so that you are aware of what happens.

When you are ready, we can provide you with a free, no obligation conveyancing quote from our panel of leading solicitors.

How Much Mortgage Can I Afford?

Before you apply for a home loan, you’ll first need to consider whether you’re able to afford to make the monthly repayments. However, there are more factors to bear in mind than just that. Mortgage providers look at your outgoings and income to determine whether or not you’ll be able to keep making payments if the interest rate rises or your life circumstances change.

How Does A Lender Work Out How Much Mortgage You Can Afford?

At one time, a mortgage lender would base how much you were able to borrow primarily on a multiple of your income, known as a loan-to-income ratio. For example, with an annual income of £50,000, a mortgage lender may have offered you a loan of around 3-5 times that sum, resulting in a mortgage of as much as £250,000.

Today, though, when you make a mortgage application, lenders cap that loan-to-income ratio at 4 ½ times your income. Also, they have to asset the level of monthly repayment you’re able to afford, taking into account your living and personal expenses together with your income in an affordability assessment.

Lenders also carry out a stress test into your ability to make repayments in the long term by taking into account the possible effects of rises in the interest rate and potential lifestyle changes. Should the lender believe you’d be unable to afford to make repayments under such circumstances, it’s likely they’ll limit the amount you’re able to borrow.

What Does A Lender Take into Account?

When a lender is working out the amount you’re able to afford to borrow, they look at the following:

  • Your income - including your basic income, any income from investments or pensions, any other earnings from commission, bonuses, freelance work, another job or overtime, and any financial support or child maintenance from an ex-partner. You’ll be required to provide bank statements and payslips to evidence your income. Self-employed individuals must provide business accounts, bank statements, and details of any income tax paid.
  • Your outgoings – these include credit card payments, maintenance payments, loans and existing credit agreements, utility bills, and insurance costs. You may also be asked for an estimate of living costs, including spending on childcare, basic recreation and clothing, and for some bank statements that support those figures.
  • Future changes which could have an impact – lenders will assess if you’d still be able to make your repayments if the interest rate went up, if you lost your job or couldn’t work because of an illness, or if your life changed by taking a career break or having a new baby.

How Much Am I Able to Borrow?

You’ll need to bear the above factors in mind before you consider making an application for a home loan. Although it might be tempting to try to borrow a higher amount, remember that if your life circumstances change unexpectedly, you’ll still be required to pay your mortgage, and this could tip you into debt. You’ll need to bear the above factors in mind before you consider making an application for a home loan. Although it might be tempting to try to borrow a higher amount, remember that if your life circumstances change unexpectedly, you’ll still be required to pay your mortgage, and this could tip you into debt.

Once you know how much mortgage you can afford, take a look at our conveyancing quote tool which will help you get the best deal possible on your conveyancing costs.