We are really struggling to pay our mortgage. How do we go about getting a "mortgage holiday" from our bank?
It is a rarely known fact but most banks and credit unions offer a "mortgage holiday" in most of their home loan products. Basically it where you can put your loan repayments on hold for a period of time, sometimes up to one year.
Some banks may call their "mortgage holidays" by another name such as "parental leave" or "repayment pause options" … but regardless of the name, they are essentially the same in nature
Check with your bank first as the rules for these mortgage holidays do vary from bank to bank and some are stricter than others. Generally you need to be ahead in your repayment schedule to be eligible for a mortgage holiday and be a customer of the bank for a few years.
Whilst some banks do not require any repayments at all, some require a reduced payment during a mortgage holiday. Each application is on a case-by-case and bank-by-bank basis. Banks will not allow for you to re-draw on your loan during the period of your "holiday".
I suggest that you phone your bank first Trudi to confirm they offer this option on your loan type and that they can put a pause on your repayments for a year. Make sure that you confirm with the bank that there is no additional cost and the interest rate should not change, subject to any future interest rate rises. There is a chance that additional mortgage insurance may be required.
Unfortunately getting a holiday on your mortgage doesn't mean that the bank will freeze the interest as well ... it would be nice if they did! Please be aware that your loan will still accrue at the normal interest rate and subject to interest rate rises. Your loan balance will rise as a result.
Whilst you can take advantage of the repayment free period in full, I recommend making some payments to minimise the impact of the interest continuing to accrue on your loan.
Once you return from your mortgage holiday, expect to pay a slightly higher amount as repayments are recalculated for the revised balance of the loan.
DISCLAIMER : Advice is general in nature. Readers should always seek further financial advice before making financial decisions.