april1967:

Most lenders will require overpayments to have been made beforehand.

Like Maxsteam you are confusd between making an underpayment and taking a payment holiday.

Most lenders will only accept an underpayment if you have previously made an overpayment of the same value or more.

A payment holiday is a lender agreed missed payment. No overpayment is required beforehand this a straightforward break from payment for an agreed amount of time (normally no more than 3 months in any one year) but as mentioned in my previous post, the interest value of the missed payment wil be added onto your loan balance so while you may miss a payment it will cause your mortgage balance to rise slightly with the interest added to the balance.

It might be a good idea to get your life assurances reviewed but be careful accepting when considering a cheaper policy if it changes the structure or value of the policy. Some IFA's are still not averse to selling an inferior policy on the basis that it is cheaper....but may not offer the same value of protection.

One thing to remember is that financial services do not sell a product, they sell the value of a product and while this may lead to small differences in price between providers it is unlikely that you would see a considerable difference in price unless you are getting less value for our money.

Most lenders will require overpayments to have been made beforehand. Other options to consider would include:

1. Asking your lender for a further advance of £5,500 to clear the loan. However, this may not be feasible due to your reduced household income and possibly the value of your property. There is also the issue that although you would make reduced payments each month, they will go for longer and you will end up paying more in the long term.

2. Shift the loan to an interest free/low interest credit card. This may reduce your payments a bit.

3. Review your life cover, etc with an independent financial adviser to see if you can reduce the cost here.

Apologies for late reply, meant to reply to this post a couople of days ago

I think Maxsteam is confusing the issue slightly here.

Max is thinking of the overpament/underpayment system where the lender will let you reduce your payments if you have overpaid by an amount already. If you have overpaid £1000 on your mortgage then they will let you make underpayments on your mortgage to the value of £1000.

A payment holiday is an agreement to totally miss up to 3** months (**check what your lender will allow) mortgage payments by prior arrangement with the lender. This means that you will not need to make any payment what so ever during this period but as Maxsteam has rightly said, "Everything has a cost"

The cost element to this is that the interest that you would normally have paid in this period will be capitalised and added to your mortgage balance so if you would normally pay say £650 per month on your mortgage and if we say that £333 of this payment was interest the lender would normally charge and if you were to take a 3 month holiday then the lender would capitalise this figure: 3 months x £333 = £999 and add this amount to your loan balance which you would then pay interest on for the remaining loan term...in effect you have missed 3 mortgage payments but you have added £999 to your mortgage balance.

I would not suggest this as a suitable method for paying off another debt.

Check with your lender before making any decisions an refer to your mortgage offer for details of what the lender may allow

You need to look at the details and the interest rates. For some payment holidays, you need to first overpay the mortgage so, if the loan is at a lower rate than the mortgage (most loans are), it may be a good idea.

Please, though, don't look for something for nothing. Everything has a cost.

Hello,

Some guidance would be greatly appreciated:

I have just took out a 2 year fixed rate mortgage with the Halifax after being on a higher fixed rate with them for the last 2 years.

We moved into this brand new home 2 years ago and we took out a loan of 10k which is now down to 5.5k to help with costs etc..... We are getting a bit sick of this loan hanging over our head and our financial landscape has changed as my wifes work with a charity has completely dried up due to government cuts.

Our mortgage has an option of a 6 month payment holiday and I am thinking of taking them up on this offer and clearing the 5.5k over that 6 month period?

Are there any downsides to this? At first glance it looks like a good idea but am I missing something?