How to apply for a three month mortgage break if you’re affected by coronavirus

Chancellor Rishi Sunak has introduced a series of emergency measures to protect households affected by the fast-spreading coronavirus.

This will include a three month mortgage break for households experiencing financial difficulty – including the self-employed.

The proposal was unveiled by Prime Minister Boris Johnson and Chancellor Rishi Sunak as part of Britain's fight against the pandemic.

"We have had extensive discussions with the banks, who understand the situation that people are in and will, they have assured me, provide flexibility to those people in those circumstances, and understanding," Sunak said.

But how will it work and who can apply for it?

Earlier this week, high street bank First Direct announced it's introducing mortgage extensions to support those impacted by the virus and unable to work.

For customers in financial difficulty, its revised terms will include early access to fixed rate savings accounts without penalties, and the option to apply to extend their mortgage or switch their rate.

Anna MacFarlane, at first direct, said: "We know some of our customers will be affected financially by Covid-19. To help our customers who need some support we have a range of measures to help them through these uncertain times."

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NatWest and RBS also pledged to make the move last week – stating that any customers in financial trouble thanks to the infection – whether they have it or have seen their earnings hit because of it – could qualify for a break from mortgage and loan payments, higher card limits and be able to close savings accounts early with no penalties.

If you're in need of mortgage relief, the first step is to speak to your lender and explain your situation.

This should be done over the phone if you are in self-isolation.

Explain your financial situation – such as if you are self-employed and have had to apply for emergency benefits such as employment support allowance.

If you're claiming statutory sick pay – explain that this (£94.25 per week) may not be enough to keep on top of your payments.

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As for the intricacies, the Government is yet to announce exactly how the so-called 'mortgage holiday' will plan out.

A NatWest spokesman told Mirror Money that the help available will be available on a case-by-case basis.

"We are monitoring the potential impact of coronavirus across all our customers to ensure we can support them appropriately through any period of disruption," the spokesman said.

"We understand that there may be circumstances where a personal customer may fall into financial difficulty as a result of the impacts of coronavirus, for instance, loss of income.

"We will look to understand each customer’s situation on a case-by-case basis and can offer a number of options to help them manage their finances. We would encourage any customer experiencing financial difficulty to get in touch with us."

Sam Harhat, head of financial services at estate agency Andrews, said the Government now needs to come forward with the small print on how this policy will operate – and what it means for renters.

"The Government’s backing of mortgage holidays of up to three months for struggling households is clearly welcome but, as ever, the devil is in the detail.

"If this is a smooth and seamless process that will enable homeowners to self-isolate without having to worry about their mortgage payments then clearly it is a significant move in the right direction.

"Exactly how much lenders are onside remains to be seen, as are the logistics of such a major initiative, but on the surface this is exactly the kind of bold action homeowners wanted to see.

"It remains to be seen if the mortgage holiday will extend to landlords who may be struggling if their tenants are in financial difficulty.

"The elephant in the room, of course, is how the Government will be helping the huge numbers of tenants who may also struggle with their rental payments.

"For homeowners, the Government made all the right noises in Tuesday’s media conference but for tenants we need considerably more clarity."

The news comes after the Bank of England slashed the base rate to just 0.25% last week.

Under the changes, homes with tracker mortgages should see their rates drop as these mortgages fluctuate alongside the base rate.

Will all customers receive an automatic three-month payment holiday?

A flexible approach will enable all types of lenders to offer the right support for customers. Many lenders will want to speak to customers to find out how they can tailor the best option for them.

Firms will help customers the best way for the individual, but an automatic payment holiday may not always be the most suitable approach and may not be required by all customers.

Firms will be speaking to credit reference agencies to ensure consistent treatment of those customers to whom a repayment holiday is made available.

How do I apply for a payment holiday?

Lenders recognise that these are unprecedented and difficult times for customers. This is why they are offering customers who are up to date with their mortgage payments and impacted by COVID-19 the ability to self-certify if they need help.

Under usual circumstances, the lender would have to assess the customer’s finances and consider what forbearance options may be the most suitable. This is being waived to allow firms to implement a more straightforward process in an otherwise stressful time.

If you wish, the lender could conduct a full assessment of your finances. It’s therefore important that customers who believe they may be impacted by COVID 19, either directly or indirectly, contact their lender at the earliest possible opportunity to discuss if the payment holiday is a suitable option for them.

How do 'payment holidays' work?

The mortgage repayment is deferred for a period. The monthly payment changes to zero, and interest accrues for the period. This may be particularly appropriate where there is a temporary shortfall of income.

However, this is not a solution where, because of a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments and there is little prospect of an improvement in the situation in the foreseeable future.

Where repayments are deferred for a time, the borrower will need to make up these repayments in the future, which could be over the remaining term.

How will this affect my credit score?

Lenders have different approaches for reporting to credit reference agencies. Arrears that are accrued may be reported to the CRA. Firms will make efforts to ensure that forbearance offered under these circumstances will not result in an adverse impact on the customer’s credit score.

What if I don’t own my property but rent instead?

You should contact your landlord or managing agent if you have problems paying your rent. If you are a landlord and your tenants are unable to pay their rent you should contact your lender as soon as possible to discuss the options that may be open to you.

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