How to apply for a mortgage payment holiday

What is a mortgage payment holiday?

A mortgage holiday, sometimes called a payment holiday mortgage, is an agreement with your lender that lets you pause or reduce your monthly repayments for a set period of time. Most lenders only offer them for a few months, and interest will continue to build up during the break. That means once the holiday ends, your repayments are likely to be higher than before.

It’s important to remember that a mortgage holiday is never automatic. You must get your lender’s approval. If you stop paying without an agreed holiday in place, you’ll fall into arrears which could damage your credit record and even put your home at risk.

How to get a mortgage holiday

• Check your mortgage terms - some mortgages allow payment holidays, but others don’t.

• Work out the cost - find out how much your repayments will increase afterwards.

• Contact your lender - they’ll confirm whether you’re eligible and provide an application form.

• Get approval before stopping payments - missing payments without agreement counts as arrears.

If you’re confident it’s the right option, you’ll need to contact your lender directly. They’ll review your situation, check whether you meet their eligibility rules, and guide you through the application process.

If you simply stop paying without approval from your lender, you will be in arrears on your mortgage and your home will be at risk.

Instead of taking a mortgage holiday, you could switch to a cheaper mortgage deal. Lower monthly payments may make your mortgage more affordable and help you avoid the extra costs of a payment holiday.

If you need help finding the right deal, you can contact a mortgage broker.

Who is eligible for a mortgage holiday?

Whether you are allowed a payment holiday depends on your lender, your mortgage deal and your circumstances.

Mortgage payment holiday conditions vary from lender to lender, but typically rules include:

• The length of the payment holiday you are allowed to take. The maximum is usually between 1 and 12 months.

• A minimum period you have made your mortgage payments on time. This is usually 6 to 12 months.

• You usually must be up to date with payments to take a holiday. But some lenders may allow a payment holiday if you have just one payment in arrears.

• A maximum percentage (e.g. 80% loan-to-value) of your property's value your mortgage can cover, and in some cases a payment holiday would push it above this.

To find out if you are eligible, check your mortgage terms and conditions or ask your lender.

How much will taking a mortgage holiday cost me?

Although a mortgage holiday gives short-term breathing space, it comes at a price. Because interest continues to build up while you’re not making payments, the overall cost of your mortgage will increase.

For example, if you had a £200,000 mortgage at 4.5% over 25 years, your monthly repayment would be about £1,110. If you then took a three-month break, roughly £2,200 in interest would be added to your balance. When you resumed payments, your monthly bill would rise to around £1,129.

That may not sound like much, but over the life of the mortgage it could add more than £2,000 in extra interest.

Should I take a mortgage holiday?

A mortgage payment holiday should usually be a last resort. If you can afford to keep paying, even if that means tightening your budget elsewhere, it will almost always save you money in the long run.

The right time to consider a holiday is when you’re facing temporary financial difficulty, such as a sudden drop in income, redundancy, or illness, and you know you’ll be able to start making repayments again once the break ends.

Used carefully, a payment holiday can provide valuable breathing space, but it’s not a long-term solution.

What can I do if I’m not eligible for a mortgage holiday?

If you’re a borrower who is not eligible to take up a mortgage payment holiday, but you are still struggling to make payments, don’t panic. Speak to your lender, who will be able to offer tailored support for your individual situation. 

Lenders see repossession as a last resort, and would much rather come to an agreement that will allow you to continue paying your mortgage. 

Options could include:

• Increasing your mortgage term (e.g. from 20 to 25 years) brings down your monthly payments. But taking longer to pay off your mortgage means it costs you more overall.

• Converting to an interest-only mortgage brings down your monthly payments. But you have to find a way to pay off your mortgage balance at the end of its term.

However, be aware that the FCA has recommended that lenders report any further support (such as additional payment deferrals on top of the 6 months’ of payment holidays) to the credit agencies, so this may have an impact on your ability to get credit in the future.

Find help elsewhere

If you’re unsure about what to do, you can get advice from an independent financial adviser or get free debt help.

Contact a debt charity like Citizens Advice or StepChange for advice on budgeting and managing debts.

Alternatives to a mortgage holiday

Before applying for a payment holiday mortgage, consider other ways to cut your costs:

1. Switch to a cheaper mortgage deal

Remortgaging to a lower rate could reduce your monthly repayments. This is often cheaper than taking a holiday. A mortgage broker can help you compare remortgage deals, even if you have bad credit.

2. Extend your mortgage term

Increasing the length of your mortgage reduces monthly repayments. But you’ll pay more interest overall, so weigh the trade-offs carefully.

3. Consider an interest-only mortgage

Switching to interest-only mortgage lowers monthly costs but means your mortgage balance won’t reduce. You’ll need a plan to repay it later.

4. Insure your mortgage payments

If you’re worried about future income loss, consider:

• Income protection insurance – pays a percentage of your salary (e.g. 65%) if you can’t work.

• Mortgage protection insurance – pays a fixed monthly sum (e.g. £2,000) towards your repayments.

Staying in control of your mortgage

The best way to minimise costs is to keep paying your mortgage every month, or even make small overpayments if you can.

But if your circumstances change, don’t ignore the problem. Speak to your lender as soon as possible and explore all your options.

A mortgage holiday can help in the short term, but it’s only one of several tools available to keep your finances on track.