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Coronavirus: Advice for homeowners

20/03/2020

During these unprecedented times, many people will be wondering how COVID-19 (coronavirus) will have an impact on daily life.

However, for those who have a mortgage to pay, there’s also the fear of losing your home.

Mortgages are a form of secured loan, which means in normal circumstances defaulting could result in the property being repossessed.

However, the government has offered homeowners a lifeline.

Working alongside the UK’s major banks, it will work to offer “flexibility” and “understanding” to those struggling with their mortgage payments.

As a result of this, many banks such as RBS, First Direct and NatWest announced that they would be offering a three-month break in mortgage payments to those who need it.

The measures were revealed by Prime Minister Boris Johnson and Chancellor Rishi Sunak in a series of emergency plans to protect those affected by the ever-spreading virus.

But how does this work? Can everyone apply and how do you apply for it?

We’re breaking it down for you in this self-help guide to managing your mortgage during the coronavirus outbreak.

How do payment breaks work?

The way this works is that your mortgage payments are deferred, meaning you don’t need to make them for a period of time.

These payments are either then added to the end of your contract or an agreement is made for you to catch up on what is owed once your situation improves.

It’s important to remember, however, that interest will be added during the break period. But don’t worry, this will be factored into your payments when you begin making them again.

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Are the breaks automatically put in place?

The break in mortgage payments will be handled on a case by case basis, so won’t be automatically added to your mortgage account/agreement.

Most lenders will want to speak to you about your situation first to ensure that they offer you the right option. Any help you receive will be tailored to what you need, so putting automatic breaks in place might not be needed by everyone.

If it’s deemed that a three-month break is necessary for your circumstances, then you will need to work with the bank/lender to put this in place.

How do I apply for a payment break?

Firms understand that this is a scary and tough time for their customers, so they are also now allowing those up to date with their mortgages to self-certify if they need help due to the virus affecting their finances.

Normally, lenders would take an extensive look at your circumstances to provide you with the best option. This is now being relaxed to allow for an easier process to be put in place and help avoid high stress levels for everyone involved.

As such, it’s important that you contact your mortgage provider as soon as possible if you have been or think you will be impacted by coronavirus. That way you can come to a mutual decision whether the break is the right solution for you.

Will the break affect my credit rating?

In normal circumstances, deferring payments would be reported to the credit reference agencies by your lender, but that doesn’t mean it would necessarily affect your credit score.

This is because it would have been agreed in advance and as such you technically wouldn’t fall into arrears.

Most major banks have also confirmed that taking a payment break would not affect customers’ credit files.

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I rent my home, what options do I have?

The government has announced plans today (March 18) that those who rent their properties will have protection from eviction during this time of uncertainty.

You can find out more about this on our designated page by clicking here.

What banks are offering support?

  • Natwest and RBS are offering three-month payment breaks to their mortgage customers, waiving early closure charges on fixed savings accounts and refunds on any cash advance fees
  • Santander is offering support tailored to individual situations such as deferring or reducing repayments that are due in the coming months
  • First Direct has introduced a mortgage extension programme, which allows people to extend the remaining term of their mortgage or switch their rate.
  • Barclays have removed all penalty charges for accessing fixed savings accounts early

The majority of banks are also waiving any fees for missed payments and offering increases on withdrawal limits on debit cards or credit cards.

If you’re struggling with your finances and debts, contact us today. Our experts are on hand to offer you free and confidential advice, regardless of your circumstances. All you need to do is call us on 0808 253 3301 or click below to be connected to an advisor.

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